Question

Flexible Budgeting and Variance Analysis

I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

Standard Amount per Case
	Dark Chocolate		Light Chocolate		Standard Price per Pound
Cocoa	10 lbs.		7 lbs.		$5.10
Sugar	8 lbs.		12 lbs.		0.60
Standard labor time	0.4 hr.		0.5 hr.

	Dark Chocolate		Light Chocolate
Planned production	5,400 cases		12,000 cases
Standard labor rate	$15.50 per hr.		$15.50 per hr.

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

	Dark Chocolate		Light Chocolate
Actual production (cases)	5,100		12,500
	Actual Price per Pound		Actual Pounds Purchased and Used
Cocoa	$5.20		139,200
Sugar	0.55		186,000
	Actual Labor Rate		Actual Labor Hours Used
Dark chocolate	$15.00 per hr.		1,860
Light chocolate	16.00 per hr.		6,410

Required:

1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:

     a. Direct materials price variance, direct materials quantity variance, and total variance.

     b. Direct labor rate variance, direct labor time variance, and total variance.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a.	Direct materials price variance	$
	Direct materials quantity variance	$
	Total direct materials cost variance	$
b.	Direct labor rate variance	$
	Direct labor time variance	$
	Total direct labor cost variance	$

2. The variance analyses should be based on the   amounts at   volumes. The budget must flex with the volume changes. If the   volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the   production. In this way, spending from volume changes can be separated from efficiency and price variances.

Answer 1

Actual Results Dark Chocoleate otl Lis ht Chocalate Achual ProducHion SIOO A) malerial Cost Cocoa Total Achual Quamt ty (s) S,258 Tolal Stand and Quantit Clbs) lo00 139,200 139 Soo Actual cogumpkon is higher thom Stamelard Cons unptisn we Gsume that in both Chocoletes, Conaumpkon increased in Same Retio) 139,200 39,200 138so0 139.s00 5.20 per pound AckualecCesio Rate CS CamScanner

Sugas ht Danc Tolal otal Achual auantity Cbs) 1226 3१,१न५ 186000 Stondad AuomtyObs) 190,800 4o8oo IS0000 Achual Consumphon is Iower them stamda d codumplion, we hat in both chocolates, conbumpH on decreased 'm asune ame Rati 146900 18,000 140000 40.55pound CS SCA thar Rate CamScanner

Achual Results B) Labor cat Usht Dask soం Actual oducon a,270 G410 Actual Labour Hours 1,860 41HY Adual Laboy Rate 120ox.5) (S lo0x 0-4) Standard Labor Hrs 2040 Scanned with CamScanner

Variamee Analy sis (material Cot) ToteD Price Vavicmce Light Dark (520-S10)x B00 (s-20-5-10)x87 Cocoa (A) (s.20-5.10) xSI250 3.920 Price Variace S, 126 CAcmal Price- Stonmdand Prire Acuel auemtt consum.ed) Sugar (B) 0.55-0.60) x 32Iry (o5-0-60)xn6 (0.ss-0.t0)x1 Price Varicmce 7,311 Tokal Direct materia ॐ ५,५2० 3137 Price Vantmce (AtB Scanned with CS CamScanner

Quamtit Vamanee Tatal Usht Dant Stemeland Quantity) Acdnal Quanty uomtt Varomce (Ctemeland Pe) (134,30 -13 8,) Cocoa (A) 51353-SL00D) (&Py2 ) 3,570 2254 19L000- 1900) (I436-15900) Sugar (B) x o.60 060 O.6o X 2,83o $ -2,26y = -GI6 690 Total uoni ariame C4HB) Vanicmce have bepn celeulated withaut takirf ) Above Notes Volume impact vartm Analy sís, volume Gmpact Ahulol not be valume mpact is not a 2)Fox measuse a Conshclered, as etechenes &petormeme Scanned with CS CamScanner

Now, tot Direct material Cost uamtit Vaicmce Price Vanicme Vaiamce 1 Ught Dak Toklmateral Cst 1,43 3837 Vaniam ce witheut volume Impact Vaname Amalysis (Laboy Cest Stamdard Reute) Achual Rate Labor Rate Vaunamce A Actual Labor Hous ight Dank 15-5.50)x1860 Rate Voniamce -3,205 $930 Time Variamce Achual Labor Hs - Standard Labor Hrs.) Stareland Rate. (19k0-2040) -Gas0) S270 CSScanned with TOOCalo Cetwicmeę $ 5,605

Variance analysis for measuring effectiveness has been calculated excluding volume impact. 6 pages are attached with this solution.

Feedback me for any improvement.

Thanks.