P10.4 (L01,4,5), AP During her internship, Jaelynn struggled with standard cost variance analysis for some of the firm's clients. Her supervisor suggested she approach it a different way: instead of calculating the variances using the standards and specific company details, she asked Jaelynn to interpret the total amounts used in the variance framework to better see how it all fit together. Jaelynn's supervisor selected one client at random and provided the following costs and descriptions to her trainee. Standard cost of DM purchased $17,625 Actual fixed-MOH cost $ 9,800 Standard cost of DL used 28,980 Actual cost of DM purchased 17,300 Actual variable-MOH cost 6,410 Flexible budget DL cost 28,080 Applied fixed-MOH cost 10,400 Standard cost of DM used 16,500 Flexible budget DM cost 15,600 Master budget fixed-MOH cost 10,000 Actual DL cost 29,500 Flexible budget variable-MOH cost Standard variable MOH cost for actual cost driver used 6,050 6,500 Required a. Using the costs described above, populate a complete variance analysis framework to calculate (1) price and efficiency variances for DM, DL, and variable-MOH, and (2) price and volume variances for fixed-MOH. CHAPTER 10 Variance Analysis and Standard Costing b. What are some plausible explanations for these variances? Try to offer some scenarios that would be con- sistent with several of these variances at the same time. c. Of all the costs described above, which one(s) would appear in the following income statements: master budget, flexible budget, or actual income statement? Explain. d. Focusing on the DM resource: Did the company purchase the same quantity as what was used? How do you know? Which manager(s)/department(s) within the company should be consulted regarding the DM price variance? The DM efficiency variance? e. Focusing on the DL resource: Which manager(s)/department(s) within the company should be consulted regarding the DL price variance? The DL efficiency variance? f. Focusing on the variable-MOH resource: Is it possible this company is using DM as its allocation base for MOH costs? Is it possible the company is using DL as its allocation base for MOH costs? Explain. P10.4 (L01,4,5), AP During her internship, Jaelynn struggled with standard cost variance analysis for some of the firm's clients. Her supervisor suggested she approach it a different way: instead of calculating the variances using the standards and specific company details, she asked Jaelynn to interpret the total amounts used in the variance framework to better see how it all fit together. Jaelynn's supervisor selected one client at random and provided the following costs and descriptions to her trainee. Standard cost of DM purchased $17,625 Actual fixed-MOH cost $ 9,800 Standard cost of DL used 28,980 Actual cost of DM purchased 17,300 Actual variable-MOH cost 6,410 Flexible budget DL cost 28,080 Applied fixed-MOH cost 10,400 Standard cost of DM used 16,500 Flexible budget DM cost 15,600 Master budget fixed-MOH cost 10,000 Actual DL cost 29,500 Flexible budget variable-MOH cost Standard variable MOH cost for actual cost driver used 6,050 6,500 Required a. Using the costs described above, populate a complete variance analysis framework to calculate (1) price and efficiency variances for DM, DL, and variable-MOH, and (2) price and volume variances for fixed-MOH. CHAPTER 10 Variance Analysis and Standard Costing b. What are some plausible explanations for these variances? Try to offer some scenarios that would be con- sistent with several of these variances at the same time. c. Of all the costs described above, which one(s) would appear in the following income statements: master budget, flexible budget, or actual income statement? Explain. d. Focusing on the DM resource: Did the company purchase the same quantity as what was used? How do you know? Which manager(s)/department(s) within the company should be consulted regarding the DM price variance? The DM efficiency variance? e. Focusing on the DL resource: Which manager(s)/department(s) within the company should be consulted regarding the DL price variance? The DL efficiency variance? f. Focusing on the variable-MOH resource: Is it possible this company is using DM as its allocation base for MOH costs? Is it possible the company is using DL as its allocation base for MOH costs? Explain
