Belgian Chocolate Company makes dark chocolate and light chocolate. Both product

Question

Belgian 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 Standard Price per Chocolate 9 lbs. 7 lbs. 0.50 hr. Chocolate 6 lbs. 11 lbs. 0.60 hr Pound $5.30 Cocoa Sugar Standard labor time 0.60 Planned production Standard labor rate 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: Dark Chocolate 4,100 cases $16.00 per hr. Light Chocolate 10,800 cases $16.00 per hr. Dark Chocolate Light Chocolate Actual production 3,900 11,200 Actual Price per Actual Pounds Purchased Pound and Used $5.40 0.55 Actual Labor Rate $15.50 per hr. 16.50 per hr. Cocoa 102,800 Sugar 146,700 Actual Labor Hours Used Dark chocolate 1,770 Light chocolate 6,890

Explanation / Answer

Direct Material Price Variance

Std Qty× ( Standard Price- Actual Price)

Std Qty

Cocoa= 9×4100+ 6×10800= 101700

Sugar= 7×4100+ 11×10800=147500

Direct Material Price VVariance

= ($0.10)×101700+$ 0.05×147500= ($2795)

i.e $2795 Adverse

Direct Material Qty Variance

Standard Price× ( Std Qty- Actual Qty)

Cocoa= $5.3× (101700- 102800)= ($5830)

Sugar= 0.6$×( 147500-146700)= $480

i.e.$ 5350 Adverse Variance

Direct Labour Rate Variance:

(Std Rate-Actual Rate)× Std Labour Hrs

Dark= (16-15.5)× 2050=$1025

Light=(16-16.5)×5400=($2700)

i.e.$1675 Adverse Variance

Direct Labour time Variance

Std Rate× (Std Hrs- Actual Hrs)

Dark= $16× ( 2050-1770)= $4480

Light=$16× (5400-6890)= ($23840)

i.e $19360 Adverse Variance

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