Standard Amount per Case        Dark Chocolate      Light Chocolate      Standard Price per Pound Cocoa 12 lbs.   9 lbs.   $5.00   Sugar 10 lbs.   14 lbs.   0.60   Standard labor time 0.3 hr.   0.4 hr.           Dark Chocolate Light Chocolate Planned production 4,200 cases   12,100 cases   Standard labor rate $15.50 per hr.   $15.50 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) 4,000 12,600        Actual Price per Pound      Actual Pounds Purchased and Used Cocoa $5.10   162,200   Sugar 0.55   211,000     Actual Labor Rate      Actual Labor Hours Used Dark chocolate $15.10 per hr.   1,090   Light chocolate 15.90 per hr.   5,170   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. 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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 lbs.   9 lbs.   $5.00  
Sugar 10 lbs.   14 lbs.   0.60  
Standard labor time 0.3 hr.   0.4 hr.      

 

  Dark Chocolate Light Chocolate
Planned production 4,200 cases   12,100 cases  
Standard labor rate $15.50 per hr.   $15.50 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) 4,000 12,600
       Actual Price per Pound      Actual Pounds Purchased and Used
Cocoa $5.10   162,200  
Sugar 0.55   211,000  
  Actual Labor Rate      Actual Labor Hours Used
Dark chocolate $15.10 per hr.   1,090  
Light chocolate 15.90 per hr.   5,170  

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.

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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