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.   $4.9   Sugar 10 lb.   14 lb.   0.6   Standard labor time 0.4 hr.   0.5 hr.           Dark Chocolate Light Chocolate Planned production 5,000 cases   11,300 cases   Standard labor rate $15 per hr.   $15 per hr.   I Love My Chocolate 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 11,800   Actual Price per Pound Actual Pounds Purchased and Used Cocoa $5   164,600   Sugar 0.55   207,900     Actual Labor Rate Actual Labor Hours Used Dark chocolate $14.7 per hr.   1,750   Light chocolate 15.3 per hr.   6,050   Required: 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: Direct materials price variance, direct materials quantity variance, and total variance. 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 $fill in the blank 1     Direct materials quantity variance $fill in the blank 3     Total direct materials cost variance $fill in the blank 5           b.   Direct labor rate variance $fill in the blank 7     Direct labor time variance $fill in the blank 9     Total direct labor cost variance $fill in the blank 11   2.  The variance analyses should be based on the   amounts at   volumes. The budget must flex with the volume changes. If the   volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the   production. In this way, spending from volume changes can be separated from efficiency and price variances.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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.   $4.9  
Sugar 10 lb.   14 lb.   0.6  
Standard labor time 0.4 hr.   0.5 hr.      

 

  Dark Chocolate Light Chocolate
Planned production 5,000 cases   11,300 cases  
Standard labor rate $15 per hr.   $15 per hr.  

I Love My Chocolate 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 11,800
  Actual Price per Pound Actual Pounds Purchased and Used
Cocoa $5   164,600  
Sugar 0.55   207,900  
  Actual Labor Rate Actual Labor Hours Used
Dark chocolate $14.7 per hr.   1,750  
Light chocolate 15.3 per hr.   6,050  

Required:

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:

  1. Direct materials price variance, direct materials quantity variance, and total variance.
  2. 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 $fill in the blank 1  
  Direct materials quantity variance $fill in the blank 3  
  Total direct materials cost variance $fill in the blank 5  
       
b.   Direct labor rate variance $fill in the blank 7  
  Direct labor time variance $fill in the blank 9  
  Total direct labor cost variance $fill in the blank 11  

2.  The variance analyses should be based on the   amounts at   volumes. The budget must flex with the volume changes. If the   volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the   production. In this way, spending from volume changes can be separated from efficiency and price variances.

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