Sauvignon Blanc chardonnay riesling total Budgeted selling price $ 9.70 $ 11.20 $ 7.70 Budgeted variable cost $ 7.15 $ 8.45 $ 6.05 Budgeted selling quantity 19,300 7,300 11,200 37,800 Actual selling price $ 9.90 $ 7.30 $ 8.30 Actual variable cost $ 6.45 $ 8.70 $ 6.10 Actual selling quantity 20,900 7,500 11,000 39,400 Required: a. Compute the sales price variance for all three wines. b. Compute the activity variance for Lake Cellars for August. c. Compute the mix and quantity variances for Lake Cellars for August.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Lake Cellars produces and sells white wine. The following data concern the three varietals of white wine the company currently offers. Sales data for August are given as follows.
| Sauvignon Blanc | chardonnay | riesling | total | |||||
| Budgeted selling price | $ | 9.70 | $ | 11.20 | $ | 7.70 | ||
| Budgeted variable cost | $ | 7.15 | $ | 8.45 | $ | 6.05 | ||
| Budgeted selling quantity | 19,300 | 7,300 | 11,200 | 37,800 | ||||
| Actual selling price | $ | 9.90 | $ | 7.30 | $ | 8.30 | ||
| Actual variable cost | $ | 6.45 | $ | 8.70 | $ | 6.10 | ||
| Actual selling quantity | 20,900 | 7,500 | 11,000 | 39,400 | ||||
Required:
a. Compute the sales price variance for all three wines.
b. Compute the activity variance for Lake Cellars for August.
c. Compute the mix and quantity variances for Lake Cellars for August.
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