1. Materials price variance = Actual quantity × (Average price − Standard price)= {{[a(19)]:#,###}} gallons × (${{[a(20)]:#,###.00}} per gallon − ${{[a(4)]:#,###.00}} per gallon)= {{[a(19)]:#,###}} gallons × ($0.90 per gallon)= ${{[a(41)]:#,###}} UnfavorableMaterials quantity variance:Standard quantity = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(1)]:#,###.00}} gallons per unit = {{[a(44)]:#,###}} gallonsMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= ({{[a(21)]:#,###}} gallons − {{[a(44)]:#,###}} gallons) × ${{[a(4)]:#,###.00}} per gallon= (100 gallons) × ${{[a(4)]:#,###.00}} per gallon= ${{[a(46)]:#,###}} UnfavorableLabor rate variance = Actual hours × (Actual rate − Standard rate)= {{[a(23)]:#,###}} hours × (${{[a(24)]:#,###0.00}} per hour − ${{[a(5)]:#,###.00}} per hour)= {{[a(23)]:#,###}} hours × ($0.40 per hour)= ${{[a(13)]:#,###}} UnfavorableLabor efficiency variance:Standard hours = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit = {{[a(48)]:#,###}} hoursLabor efficiency variance = (Actual hours − Standard hours) × Standard rate= ({{[a(48)]:#,###}} hours − {{[a(48)]:#,###}} hours) × ${{[a(5)]:#,###.00}} per hour= (400 hours) × ${{[a(5)]:#,###.00}} per hour= ${{[a(14)]:#,###}} UnfavorableBudget variance = Actual fixed overhead − Budgeted fixed overhead= ${{[a(26)]:#,###}} − ${{[a(17)]:#,###}}= ${{[a(15)]:#,###}} UnfavorableVolume variance = Budgeted fixed overhead − Fixed overhead applied to work in process= ${{[a(17)]:#,###}} − ({{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour)= ${{[a(17)]:#,###}} − (${{[a(54)]:#,###}})= ${{[a(16)]:#,###}} Unfavorable2. and 3.
The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Average price = {{[a(17)]:#,###}} gallons × ${{[a(24)]:#,###.00}} per gallon = ${{[a(39)]:#,###}}. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = {{[a(19)]:#,###}} gallons × ${{[a(4)]:#,###.00}} per gallon = ${{[a(40)]:#,###}}. The materials price variance is ${{[a(41)]:#,###}} Unfavorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = {{[a(21)]:#,###}} gallons × ${{[a(4)]:#,###.00}} per gallon = ${{[a(43)]:#,###}}. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = ({{[a(22)]:#,###}} units × {{[a(1)]:#,###.00}} gallons per unit) × ${{[a(4)]:#,###.00}} per gallon = {{[a(44)]:#,###}} gallons × ${{[a(4)]:#,###.00}} per gallon = ${{[a(45)]:#,###}}. The difference is the Materials Quantity Variance which is ${{[a(46)]:#,###}} Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = {{[a(23)]:#,###}} hours × ${{[a(24)]:#,###.00}} per hour = ${{[a(47)]:#,###}}. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = ({{[a(22)]:#,###}} units × {{[a(3)]:#,##0.00}} hours per unit) × ${{[a(5)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(5)]:#,###.00}} per hour = ${{[a(49)]:#,###}}. The difference consists of the Labor Rate Variance which is ${{[a(13)]:#,###}} U and the Labor Efficiency Variance which is ${{[a(14)]:#,###}} Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is ${{[a(27)]:#,###}}. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is ({{[a(29)]:#,###}} units × {{[a(3)]:#,##.00}} hours per unit) × ${{[a(6)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour = ${{[a(54)]:#,###}}. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is ${{[a(28)]:#,###}}. The difference is the Fixed Overhead (FOH) Budget Variance which is ${{[a(15)]:#,###}} U and the Fixed Overhead (FOH) Volume Variance which is ${{[a(16)]:#,###}} Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = {{[a(22)]:#,###}} units × $41.20 per unit = ${{[a(55)]:#,###}}. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is {{[a(30)]:#,###}} units × $41.20 per unit = ${{[a(56)]:#,###}}. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is {{[a(30)]:#,###}} units × $41.20 per unit = ${{[a(57)]:#,###}}. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by ${{[a(32)]:#,###}} to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).