I'm Really Cold Coat Company makes women's and men's coats. Both products require filler and lining material. The following planning information has been made available: Standard Amount per Unit Women’s Coats Men’s Coats Standard Price per Unit Filler 4.0 lbs. 5.20 lbs. $2.00 per lb. Liner 7.00 yds. 9.40 yds. 8.00 per yd. Standard labor time 0.40 hr. 0.50 hr. Women’s Coats Men’s Coats Planned production 5,000 units 6,200 units Standard labor rate $14.00 per hr. $13.00 per hr. I'm Really Cold Coat Company does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, I'm Really Cold Coat Company experienced the following actual results: Women’s Coats Men’s Coats Actual production 4,400 5,800 Actual Price per Unit Actual Quantity Purchased and Used Filler $1.90 per lb. 48,000 Liner 8.20 per yd. 85,100 Actual Labor Rate Actual Labor Hours Used Women's coats $14.10 per hr. 1,825 Men's coats 13.30 per hr. 2,800 The expected beginning inventory and desired ending inventory were realized. Required: 1. Prepare the following variance analyses for both coats 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Flexible Budgeting and Variance Analysis

I'm Really Cold Coat Company makes women's and men's coats. Both products require filler and lining material. The following planning information has been made available:

Standard Amount per Unit
	Women’s Coats	Men’s Coats	Standard Price per Unit
Filler	4.0 lbs.		5.20 lbs.	$2.00 per lb.
Liner	7.00 yds.		9.40 yds.	8.00 per yd.
Standard labor time	0.40 hr.		0.50 hr.

	Women’s Coats	Men’s Coats
Planned production	5,000 units		6,200 units
Standard labor rate	$14.00 per hr.		$13.00 per hr.

I'm Really Cold Coat Company does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, I'm Really Cold Coat Company experienced the following actual results:

	Women’s Coats	Men’s Coats
Actual production	4,400	5,800
	Actual Price per Unit	Actual Quantity Purchased and Used
Filler	$1.90 per lb.		48,000
Liner	8.20 per yd.		85,100
	Actual Labor Rate	Actual Labor Hours Used
Women's coats	$14.10 per hr.		1,825
Men's coats	13.30 per hr.		2,800

The expected beginning inventory and desired ending inventory were realized.

Required:

1. Prepare the following variance analyses for both coats 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.

Round your answers to two decimal places, if necessary. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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