Question

Please create a variance analysis using the below data, equations, and answer sheet.

LC TIDEWATER WRENCH COMPANY IN-HOUSE INCOME STATEMENTS (reasonable rounding off is OK) Actual Results Detail Summary 550 x 125 68750 Flexible Budget Detail Summary 550 x 120 66000 Master (Static) Budget Detail Summary 500 x 120 60000 Revenue Revenue Revenue 1500 30000 L 120001 COGS Materials ||1250 x 1.40 Labor 1640 x 21 Variable OH Total Var. Contr. Margin Less: Fixed OH Net Income 1750 34440 11890 48080 20670 7800 12870 COGS Materials ||2 x 1.50 x 550 Labor ||20 x 3 x 550 Variable OH 18 x 1650 Total Var. Contr. Margin Less: Fixed OH Net Income 1650 33000 13200 478501 18150 8000 10150 COGS Materials 2 x 1.50 x 500 Labor 20 x 3 x 500 Variable OH 8 x 1500 Total Var. Contr. Margin Less: Fixed OHT Net Income 43500 16500 8000 8500

Answer 1

Total variance =Total results (actual results)- Master(static budgets)

                =12870-8500

                =4370

Flexible budget variance

Cost variance---------------Direct cost-------------------Material cost

Material Price variance

(AP-SP)AQ

(1.40-1.50)1250= 125U

Material Efficiency variance

(AQ-SQ)SP

(1250-1100)1.5=225F

Cost variance---------------Direct cost-------------------Labour cost

Labour Price variance

(AR-SR)AH

(21-20)1640

=1640F

Labour Efficiency variance

(AH-SH)SR

(1640-1650)20

200U

Cost variance---------------Direct cost----------overhead cost----------variable---------Spending

(AR-SR)AH

(21-8)1640

21320F

Cost variance---------------Dirsct cost----------overhead cost----------variable--------Efficiency

(AH-SH)SR

(1640-1650)8

80U

Cost variance---------------Direct cost----------overhead cost----------Fixed---------Spending

Spending variance =Planned cost-Actual cost

=8000-7800

=200F

Sales volume variance

Sales Quantity Variance

(Actual sales volume-budgeted sales volume) budgeted price

(550-500)120

=6000F