Standard Amount per Case Dark Light Standard Price per Chocolate Chocolate Pound Сосоа 121b. 81b. $7.25 Sugar 101b. 141b. 1.40 Standard labor 0.50 hr. 0.60 hr. time Planned production 4,700 cases 11,000 cases Standard labor $15.50 per $ 15.50 per rate hr. hr. Dark Chocolate Light Chocolate Actual production |(cases) 5,000 10,000 Actual Price per Actual Pounds Purchased Pound and Used |Сосоа $7.33 | 140,300 Sugar 1.35 188,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate $ 15.25 per hr. 2,360 Light chocolate 15.80 per hr. 6,120
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.
Flexible
I Love My Chocolate Company makes dark chocolate and light
chocolate. Both products require cocos and sugar. The following
planning information has been made available: (8.PNG)
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: (9.PNG)
Instructions
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, quantity, and total variance
b. Direct labor rate, time, and total variance
2. Why are the standard amounts in part (1) based on the actual
production for the year instead of the planned production for the year?
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