[jeff]

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[UCMCPA]

Well, if using becker, I'm going to just fill out the 1,2,3,4

1- 90,000

2- actual DLH worked x std voh rate – 11,000 x 8

3- std dlh allowed x std rate – 12,000 x 8

4- std dlh allowed x std rate – 12,000 x 8

Based on the book, that's what I come up with, but I'm wanting to know how many units they actually produced. The problem here is the fixed OH is not included, so this means 3 and 4 will be equal. Also, I'm coming up with a favorable efficiency variance, not sure where I'm wrong this morning.

FAR - 84
AUD - 94
REG - 86
BEC - 86

[UCMCPA]

Well, if using becker, I'm going to just fill out the 1,2,3,4

1- 90,000

2- actual DLH worked x std voh rate – 11,000 x 8

3- std dlh allowed x std rate – 12,000 x 8

4- std dlh allowed x std rate – 12,000 x 8

Based on the book, that's what I come up with, but I'm wanting to know how many units they actually produced. The problem here is the fixed OH is not included, so this means 3 and 4 will be equal. Also, I'm coming up with a favorable efficiency variance, not sure where I'm wrong this morning.

FAR - 84
AUD - 94
REG - 86
BEC - 86

[princeCPA]

@ UCMCPA Why it is Unfavourable variance? Our standard was 96,000 (8*12,000) and actually incurred 88,000 (8*11,000). What am I missing here. Let me know please.

BEC 79
FAR 86
AUD 79
REG 90

[princeCPA]

@ UCMCPA Why it is Unfavourable variance? Our standard was 96,000 (8*12,000) and actually incurred 88,000 (8*11,000). What am I missing here. Let me know please.

BEC 79
FAR 86
AUD 79
REG 90

[Qlad]

@ucmcpa….that's how calculated and was coming up with VOH efficiency with 8000 F and rate variance is 2000 UNF…

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

@ucmcpa….that's how calculated and was coming up with VOH efficiency with 8000 F and rate variance is 2000 UNF…

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[stokey45]

Guys I am really struggling with OH variances today. What is sooooo annoying is that I took this exam about 2 years ago and passed and I had the variance analysis down pat. I cannot get a grip on it this time around. It is driving me INSANE!

Okay another question:

WC, Inc manufactures water pumps and uses a standard cost system. The standard factory OH costs per water pump are based on DL hours and are:

Variable OH (4hrs at $8/hr) $32

Fixed OH (4hrs at $5/hr) $20

*based on a capacity of 100,000 DLH per month

Additional info:

22,000 pumps were produced although 25,000 had been scheduled for production

94,000 direct labor hours were worked at a total cost of $940,000

The standard direct labor rate is $9 per hour

Variable OH costs were $740,000

Fixed OH costs were $540,000

What is the Foxed OH spending variance for the one month?

A. $70,000 unfavorable

B. $15,000 favorable

C. $40,000 unfavorable

D. $240,000 unfavorable

C. is correct. With this explanation:

Actual Fixed OH $540,000

Budgeted fixed OH (100,000 DHL x 5/hr) $500,000

Okay my question is wouldn't the calculation be for the spending variance Actual fixed OH compared to the Budgeted DLH rate X the Actual Hours worked? $540,000 vs. ($5.00 x 94,000)

[stokey45]

Guys I am really struggling with OH variances today. What is sooooo annoying is that I took this exam about 2 years ago and passed and I had the variance analysis down pat. I cannot get a grip on it this time around. It is driving me INSANE!

Okay another question:

WC, Inc manufactures water pumps and uses a standard cost system. The standard factory OH costs per water pump are based on DL hours and are:

Variable OH (4hrs at $8/hr) $32

Fixed OH (4hrs at $5/hr) $20

*based on a capacity of 100,000 DLH per month

Additional info:

22,000 pumps were produced although 25,000 had been scheduled for production

94,000 direct labor hours were worked at a total cost of $940,000

The standard direct labor rate is $9 per hour

Variable OH costs were $740,000

Fixed OH costs were $540,000

What is the Foxed OH spending variance for the one month?

A. $70,000 unfavorable

B. $15,000 favorable

C. $40,000 unfavorable

D. $240,000 unfavorable

C. is correct. With this explanation:

Actual Fixed OH $540,000

Budgeted fixed OH (100,000 DHL x 5/hr) $500,000

Okay my question is wouldn't the calculation be for the spending variance Actual fixed OH compared to the Budgeted DLH rate X the Actual Hours worked? $540,000 vs. ($5.00 x 94,000)

[Qlad]

@ stokey …before i start solving ur question…i am stuck on this one…what is the difference between EVA and Residual income formula? are they same?

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

@ stokey …before i start solving ur question…i am stuck on this one…what is the difference between EVA and Residual income formula? are they same?

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[UCMCPA]

Qlad… the eva and residual income is that with one method, they use the WACC as the rate to multiply the amount of capital with, the other they use a management selected rate. I just can't remember which.

So you have 100 income, 50 capital, 10% management “hurdle” rate, 20% WACC

I think the residual uses the hurdle or management rate so. 100 – 50 x .10.

EVA = 100 – 50 x .2

FAR - 84
AUD - 94
REG - 86
BEC - 86

[UCMCPA]

Qlad… the eva and residual income is that with one method, they use the WACC as the rate to multiply the amount of capital with, the other they use a management selected rate. I just can't remember which.

So you have 100 income, 50 capital, 10% management “hurdle” rate, 20% WACC

I think the residual uses the hurdle or management rate so. 100 – 50 x .10.

EVA = 100 – 50 x .2

FAR - 84
AUD - 94
REG - 86
BEC - 86

[stokey45]

@Qlad

Thanks for all of your and everyone elses help. I do not mean to bombard this blog with my lack of understanding.

Okay, according to Becker Review. EVA measures the excess of income after taxes earned by an investment over the return rate and residual income computes required return based upon a hurdle rate determined by management.

Residual income uses the hurdle rate to calculate the required return where EVA uses WACC to calculate the required return.

Hope this helps!

[stokey45]

@Qlad

Thanks for all of your and everyone elses help. I do not mean to bombard this blog with my lack of understanding.

Okay, according to Becker Review. EVA measures the excess of income after taxes earned by an investment over the return rate and residual income computes required return based upon a hurdle rate determined by management.

Residual income uses the hurdle rate to calculate the required return where EVA uses WACC to calculate the required return.

Hope this helps!

[Qlad]

thanks ucmcpa …and stokey…ur questions are helping all of us…hopefully i will get better at variances after solving so many questions…

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Author]

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