Dear rencpa,
Thanks for clarifying! I have Becker but I was not sure what the words “for operating income” in sales volume variance meant.
I redone them again and got them right this time. Two issues which were somewhat tricky –
– The material usage variance did not have to be adjusted due to the reduced actual production because of the last sentence in Other Information – I did not pay attention the first time
– Actual VOH rate had to be calculated 21,500/8,000 = 2.6875.
So this time I got the right answers:
1. Selling price variance = (Actual price – standard price)*actual amount sold = (21-20)*9,500=9,500
2. sales volume variance for operating income = budgeted CM per unit * (actual quantity sold – budgeted sales quantity)=5.65*(9,500-10,000)=-2,825
3. Direct labor rate variance = (budgeted rate – actual rate)*actual quantity of hours spent=(10-10.50)*8,000=-4,000
4. direct labor efficiency variance = (standard hours – actual hours)*standard rate=(10,000 – 8,000)*10=20,000
5. Material price variance = (standard price – actual price)*actual quantity used = (5 – 5.25)*4,000 = 1,000
6. Material usage variance = (actual quantity used – standard quantity (already adjusted for actual production))*standard price = (4,000 – 4,750)*5=3,750
7. Variable overhead spending variance = (standard rate – actual rate)*actual hours = (2 – (21,500/8,000))*8,000 = – 5,500
Thanks again, rencpa, good luck to you at your exam in December and to all of us still preparing to tackle it in Q4!
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