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14-37 (35 min.)  Direct materials price, efficiency, mix and yield variances (Chapter Appendix).

1.Solution Exhibit 14-37A presents the total price variance ($3,100F), the total efficiency variance ($2,560U), and the total flexible-budget variance ($540F).  

Total direct materials price variance can also be computed as:

= ×

Tolman=($0.28 – $0.30) ×   62,000=$1,240 F

Golden Delicious=($0.26 – $0.26) × 155,000=0

Ribston=($0.20 – $0.22) ×   93,000=  1,860 F

Total direct materials price variance$3,100 F

Total direct materials efficiency variance can also be computed as:

=   ×  

Tolman=(  62,000  –   45,000) × $0.30=$5,100 U

Golden Delicious=(155,000  – 180,000) × $0.26=6,500 F

Ribston=(  93,000  –   75,000) × $0.22=  3,960 U

Total direct materials efficiency variance$2,560 U

SOLUTION EXHIBIT 14-37A

Columnar Presentation of Direct Materials Price and Efficiency Variances for Greenwood Inc.

for November 2003

Actual Costs

Incurred

(Actual Inputs

× Actual Prices)

(1)

Actual Input

× Budgeted Prices

(2)

Flexible Budget

(Budgeted Inputs

Allowed for Actual

Outputs Achieved

× Budgeted Prices)

(3)

Tolman

Golden Delicious

Ribston

 62,000 × $0.28 = $17,360

155,000 × $0.26 = 40,300

 93,000 × $0.20 =

                                 $76,260

 62,000 × $0.30 = $18,600

155,000 × $0.26 = 40,300

 93,000 × $0.22 =

                               $79,360

 45,000 × $0.30 = $13,500

180,000 × $0.26 = 46,800

 75,000 × $0.22 =  16,500

$76,800

$3,100 F$2,560 U

Total price varianceTotal efficiency variance

$540 F

Total flexible-budget  variance

F = favorable effect on operating income;  U = unfavorable effect on operating income

14-53

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