Flexible Budgeting and Variance Analysis I Love My Chocolate Company makes dark
ID: 2560098 • Letter: F
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 9 lbs. 6 lbs. $4.30 Sugar 7 lbs. 11 lbs. 0.60 Standard labor time 0.3 hr. 0.4 hr. Dark Chocolate Light Chocolate Planned production 5,200 cases 10,700 cases Standard labor rate $13.00 per hr. $13.00 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) 4,900 11,100 Actual Price per Pound Actual Pounds Purchased and Used Cocoa $4.40 111,300 Sugar 0.55 152,500 Actual Labor Rate Actual Labor Hours Used Dark chocolate $12.70 per hr. 1,340 Light chocolate 13.30 per hr. 4,550 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. If there is no variance, enter a zero. 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 $
Explanation / Answer
Dark Chocolate - Actual Production = 4,900 Cases Light Chocolate - Actual Production = 11,100 Cases Standard Actual SQ / SH SR Total AQ / AH AR Total Cocoa - Dark Chocolate 44,100 4.30 189,630 Cocoa - Light Chocolate 66,600 4.30 286,380 Total Cocoa 110,700 4.30 476,010 111,300 4.40 489,720 Sugar - Dark 34,300 0.60 20,580 Sugar - Light 122,100 0.60 73,260 Total Sugar 156,400 0.60 93,840 152,500 0.55 83,875 Labor - Dark 1,470 13.00 19,110 1,340 12.70 17,018 Labor - Light 4,440 13.00 57,720 4,550 13.30 60,515 Total Labor 5,910 13.00 76,830 5,890 13.16 77,533 Answer a. Material Price Variance = (SR - AR) X AQ Material Price Variance - Cocoa = ($4.30 - $4.40) X 111,300 pounds Material Price Variance - Cocoa = $11,130 (U) Material Price Variance - Sugar = ($0.60 - $0.55) X 152,500 pounds Material Price Variance - Sugar = $7,625 (F) Material Quantity Variance = (SQ - AQ) X SR Material Quantity Variance - Cooca = (110,700 pounds - 111,300 pounds) X $4.30 Material Quantity Variance - Cooca = $2,580 (U) Material Quantity Variance - Sugar = (156,400 pounds - 152,500 pounds) X $0.60 Material Quantity Variance - Sugar = $2,340 (F) Material Price Variance Cocoa 11,130 (U) Sugar 7,625 (F) Total Material Price Variance 3,505 (U) Material Quantity Variance Cocoa 2,580 (U) Sugar 2,340 (F) Total Material Quantity Variance 240 (U) Total Material Cost Variance 3,745 (U) Answer b. Labor Rate Variance = (SR - AR) X AH Labor Rate Variance - Dark = ($13 - $12.70) X 1,340 hrs Labor Rate Variance - Dark = $402 (F) Labor Rate Variance - Light = ($13 - $13.30) X 4,550 Pounds Labor Rate Variance - Light = $1,365 (U) Labor Time (Efficiency) Variance = (SH - AH) X SR Labor Time (Efficiency) Variance - Dark = (1,470 Hrs - 1,340 hrs) X $13 Labor Time (Efficiency) Variance - Dark = $1,690 (F) Labor Time (Efficiency) Variance - Light = (4,440 hrs - 4,550 hrs) X $13 Labor Time (Efficiency) Variance - Light = $1,430 (U) Labor Rate Variance Dark 402 (F) Light 1,365 (U) Total Labor Rate Variance 963 (U) Labor Time Variance Dark 1,690 (F) Light 1,430 (U) Total Labor Time Variance 260 (F) Total Labor Cost Variance 703 (U)
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