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 | 9 lbs. | 6 lbs. | $5.40 | |||
Sugar | 7 lbs. | 11 lbs. | 0.60 | |||
Standard labor time | 0.3 hr. | 0.4 hr. |
Dark Chocolate | Light Chocolate | |||
Planned production | 5,100 cases | 11,000 cases | ||
Standard labor rate | $14.50 per hr. | $14.50 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) | 4,800 | 11,400 | ||
Actual Price per Pound | Actual Pounds Purchased and Used | |||
Cocoa | $5.50 | 112,200 | ||
Sugar | 0.55 | 155,000 | ||
Actual Labor Rate | Actual Labor Hours Used | |||
Dark chocolate | $14.00 per hr. | 1,310 | ||
Light chocolate | 15.00 per hr. | 4,670 |
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. Price variance is the difference between the actual and standard prices, multiplied by the actual quantity.Direct materials price variance, The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.direct materials quantity variance, and total variance.
b. The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.Direct labor rate variance, The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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 | $ | Unfavorable |
Direct materials quantity variance | $ | Unfavorable | |
Total direct materials The difference between actual cost and the standard cost at actual volumes.cost variance | $ | Unfavorable | |
b. | Direct labor rate variance | $ | Unfavorable |
Direct labor time variance | $ | Favorable | |
Total direct labor cost variance | $ | Unfavorable |
Materials price variance = (AP-SP)*AQ
Cocoa = (5.50-5.40)*112200 = 11220 U
Sugar = (0.55-0.60)*155000 = -7750 = 7750 F
Total material price variance = 11220 U + 7750 F = 3470 U
Material quantity variance = (AQ-SQ)*SP
Cocoa = (112200-((4800*9)+(11400*6)))*5.40 = 3240 U
Sugar = (155000-((4800*7)+(11400*11)))*0.60 = -2400 = 2400 F
Total material quantity variance = 840 U
Materials cost variance = Cocoa = Total material price variance + Total material quantity variance = 3470 U + 840 U = $4310 U
Labor rate variance = (AR-SR)*AH
dark chocolate = (14.00-14.50)*1310 = -655 = 655 F
light chocolate = (15.00-14.50)*4670 = 2355 U
Total labor rate variance = 655 F +2355 U = 1680 U
Labor time variance = (AH-SH)*SR
dark chocolate = (1310-(4800*0.3))*14.50 = -1885 = 1885 F
light chocolate = (4670-(11400*0.4))*14.50 = 1595 U
Total labor time variance =1885 F+ 1595 U = 290 F
labor cost variance = Labor rate variance+ Labor time variance =1680 U + 290 F = $1390U
Flexible Budgeting and Variance Analysis I Love My Chocolate Company makes dark chocolate and light chocolate....
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 Light Chocolate Chocolate 10 lbs. 7 lbs. 8 lbs. Standard Price per Pound Cocoa 54.50 0.60 Sugar Standard labor time 0.4 hr. Dark Chocolate Light Chocolate 11,900 cases Planned production Standard labor rate 5,600 cases $14.50 per hr. $14.50 per hr. I Love My Chocolate...
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. $4.40 Sugar 8 lbs. 12 lbs. 0.60 Standard labor time 0.3 hr. 0.4 hr. Dark Chocolate Light Chocolate Planned production 3,700 cases 13,700 cases Standard labor rate $13.50 per hr. $13.50 per hr....
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....
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 11 lb. 8 lb. $5 Sugar 9 lb. 13 lb. 0.6 Standard labor time 0.3 hr. 0.4 hr. Dark Chocolate Light Chocolate Planned production 4,200 cases 13,700 cases Standard labor rate $13 per hr. $13 per hr....
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 12 lbs. 9 lbs. $4.30 Sugar 10 lbs. 14 lbs. 0.60 Standard labor time 0.4 hr. 0.5 hr. Dark Chocolate Light Chocolate Planned production 4,200 cases 13,800 cases Standard labor rate $16.00 per hr. $16.00 per hr....
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 Light Chocolate Standard Price per Pound Chocolate Cocoa 12 lb. 9 lb. $5.3 0.6 Sugar 10 lb. 14 lb. Standard labor 0.4 hr. 0.5 hr. time Dark Chocolate Light Chocolate Planned production 5,400 cases 10,100 cases Standard labor rate $14 per hr. $14 per hr....
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 lb. 7 lb. $4.9 Sugar 8 lb. 12 lb. 0.6 Standard labor time 0.4 hr. 0.5 hr. Dark Chocolate Light Chocolate Planned production 4,400 cases 13,300 cases Standard labor rate $15 per hr. $15 per hr....
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 11 lb. 8 lb. $4.8 Sugar 9 lb. 13 lb. 0.6 Standard labor time 0.4 hr. 0.5 hr. Dark Chocolate Light Chocolate Planned production 5,700 cases 12,700 cases Standard labor rate $15 per hr. $15 per hr....
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 12 lb. 9 lb. $4.8 Sugar 10 lb. 14 lb. 0.6 Standard labor time 0.4 hr. 0.5 hr. Dark Chocolate Light Chocolate Planned production 4,000 cases 12,200 cases Standard labor rate $15 per hr. $15 per hr....
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 Standard Price per Dark Light Chocolate Chocolate Pound Cocoa 9 lb. 6 lb. $5.2 11 lb Sugar 7 lb. 0.6 Standard labor 0.3 hr 0.4 hr time Dark Chocolate Light Chocolate 5,100 cases 11,500 cases Planned production $16.5 per hr $16.5 per hr. Standard labor rate...