Flexible Budgeting and Variance Analysis Prepare the following variance analyses

Question

Flexible Budgeting and Variance Analysis

               

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

Use the minus sign to enter favorable variances as negative numbers.

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: $   _________________      _________________    Belgian Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available: Belgian Chocolate does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, Belgian Chocolate had the following actual results: Prepare the following variance analyses for both chocolates and total, based on the actual results and production levels at the end of the budget year:

Explanation / Answer

1) Direct materials price variance = 117500*(4.6-4.5) + 160000*(.60-.65) = 3750 (U)

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2) Direct materials quantity variance =

Standard Material Requirement = 4200*10 + 10500*7 = 115500 (Cocoa)

Sugar = 4200*8 + 10500*12 = 159600

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Quantity Variance = (117500 - 115500)*4.5 + (160000 - 159600)*.65 = 9260 (U)

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3) Total Variance = 3750 + 9260 = 13010 (U)

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1)Labor Rate Variance = 1270*(13.9 - 14.5) + 4500*(14.9-14.5) = 1038 (U)

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2) Labor Time Variance = 13.90*(1270 - 4200*.35) + 14.90*(4500 - 10500*.40) = 1690 (U)

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3) Total Variance = 1038 + 1690 = 2728 (U)

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