[XLS]wl10/320C07.xls · Web viewTuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each Aqu X Ap DM Price Variance DM Sales-Volume

Exercise 7-24: Price & Efficiency Variances, journal entries.

for direct materials and direct labor:

Direct Cost Sheet Input Units Cost/Input Std. CostsDirect Materials (pounds): 10.00 $4.50 $45 Direct Labor (hours): 0.50 $30 $15

January 2014 budgeted finished units 10,000 January 2014 actual results:

Production 9,850 150 ineffectivePounds of direct materials used 98,055 9.9548Pounds of direct materials purchased 100,000 10.0000Cost of direct materials purchased $465,000 Cost of direct materials purchased/unit $4.65 Direct manufacturing labor incurred

Hours worked 4,900 0.4975Wages incurred $154,350 Actual wage rate per hour $31.50

Beginning inventoryDirect materials 0 Finished Goods 0 Work-in-Process 0

Input-price variances are isolated upon purchase.Input-efficiency variances are isolated at the time of usage.

Required:1. Compute the January 2014 price and efficiency variances of direct materials and direct mfg. labor.

Actual Costsof Purchases Flexible Budget AQP

Aqp X Ap Aqp X SpDM 100,000 X $4.50

$465,000 $450,000 ($15,000.00)Unfavorable

DM Purchase Price Variance

Actual Costs Flexible Budget AQU Flexible Budget SQA Static (Original) Budget

of DM Used 9850 X 9.955 X 4.50 SQA Valued at Std. Pr. Budgeted Quantity at Std. Pr.

Aqu X Ap Aqu X Sp 445 Sqa X Sp98,055 X $4.50 9,850 X 10 X $4.50 10,000 X 10 X $4.50

$455,955.75 $441,247.50 $443,250.00

($14,708.25) $2,002.50 $6,750.00 Unfavorable Favorable Favorable

DM Price Variance DM Usage Variance DM Sales-Volume Variance

($12,705.75)($12,705.75) $6,750.00

Given: The Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit

100,000 X $4.65

98,055 X $4.65

Unfavorable FavorableDM Flexible Budget Variance DM Sales-Volume Variance

($5,955.75)

($5,955.75)($5,955.75)Unfavorable

DM Static Budget Variance

Actual Costs Flexible Budget AQU Flexible Budget SQA Static (Original) Budgetof DML Incurred 9850 X .4975 X $30 SQA Valued at Std. Pr. Budgeted Quantity at Std. Pr.

Aq X Ap Aq X Sp 4925 Sqa X SpDL 4,900 X $31.50 4,900 X $30 9,850 X .5 X $30 10,000 X .5 X $30

$154,350 $147,000 $147,750 ($7,350.00) $750.00 $2,250.00 Unfavorable Favorable Favorable

DML Rate Variance DML Efficiency Variance DML Sales-Volume Variance

($6,600)($6,600) $2,250

Unfavorable FavorableDML Flexible Budget Variance DML Sales-Volume Variance

($4,350)($4,350)($4,350)

Unfavorable

DML Static Budget Variance

2. Prepare journal entries to record the variances calculated above.

Debit Credit Debit CreditDirect Materials Control 450,000.00 465,000.00 Direct Materials Purchase Price Variance 15,000.00

Accounts Payable Control 465,000.00 465,000.00 To record direct material purchases.

Work-in-Process Control 443,250.00 443,250.00 Direct Materials Price Variance 14,708.25

Direct Materials Efficiency Variance 2,002.50 2,002.50 Direct Materials Control 441,247.50 455,955.75

To record the use of direct materials.

Work-in-Process Control 147,750.00 147,750.00 Direct Manufacturing Labor Rate Variance 7,350.00 7,350.00

Direct Manufacturing Labor Efficiency Variance 750.00 750.00 Wages Payable Control 154,350.00 154,350.00

To record direct mfg. labor incurred

3. Comment on the January 2014 price and efficiency variances of Schuyler Corporation.

Direct material variances:Purchase Price Variance -- Unfavorable

1. Why did Schuyler pay $.15 too much per pound of material purchased? Higher quality?

Usage Variance -- Favorable1. Why did Schuyler use 445 fewer pounds than allowed to produce 9,850 units?

Higher quality DM yielded less waste?Direct labor variances:

Direct Manufacturing Rate Variance -- Unfavorable1. Why did Schuyler pay $1.50 too much per hour in wages during March?

Hired better skilled labor force?Direct Manufacturing Efficiency Variance -- Favorable

1. Why did Schuyler use 25 fewer hours than allowed to produce 9,850 units?Higher skilled labor force was able to produce faster, with less material usage.

be insignificant. They are so small as to be nearly meaningless. Fluctuations about standards are bound to occur in a random fashion. It is expected that fluctuationswill occur near the standard more often than fluctuations far away from the standard.Large variations indicate a high probability of an out-of-control process.

4. Why might Schuyler calculate the materials purchase price variance and the materials efficiency variance with reference to different points in time?

The purchase and use of DMs occur at different points in time. The purchasingpoint is where responsibility for price variations occurs. Responsibility for usageis centered around production operations. Additionally, the quantity purchased is often different than the quantity used.

A key point in this problem is that both of the efficiency variances are likely to

Static (Original) Budget

Budgeted Quantity at Std. Pr.

Bqa X Sp10,000 X 10 X $4.50

$450,000

DM Sales-Volume Variance


Static (Original) BudgetBudgeted Quantity at Std. Pr.

Bqa X Sp10,000 X .5 X $30

$150,000

DML Sales-Volume Variance


Price Var. 1,945 4.50 Recognized DM Control (A x S) Ending Inventories: 1945 Conceptual

450,000.00 DM Purchase Price Variance $8,752.50 A X S441,247.50 DM Usage Price Variance $9,044.25 A X A

$15,000.00 8,752.50 Difference ($291.75)

1945 4.65 ($291.75)DM Control (A x A)

465,000.00 455,955.75

14,708.25 9,044.25 291.75 291.75

WIP Control (S x S)DM 443,250.00 DL 147,750.00

$0.15

445

$1.50

4,925 25

Price Var.($15,000.00)($14,708.25)

($291.75)

Exercise 7-25 (Continuation of 7-24)Given:The Schuyler Corporation sets monthly standard costs using a continuous-improvement

same information for March 2014 as in Exercise 7-24, except for these revised quantities.

Direct materials standard costs of $45 Direct manufacturing labor cost of $15 The standard amounts for February

amount. 0.980The standard amounts for March 2014

amount. 0.990

1. Compute the March 2014 standard quantities for DM and DML. (round to 3 decimal places)Total

Standard Quantity Allowed Per Unit Budgeted Std. QuantityJanuary February March Units Allowed

Direct Materials: 10.00 9.800 9.702 10,000 97,020 Direct Mfg. Labor: 0.50 0.490 0.485 10,000 4,850

2. Compute the March 2014 price and efficiency variances for DMs and DML.Actual Costs

of Purchases

Aqp X Ap Aqp X SpDM 100,000 X $4.65 100,000 X $4.5

$465,000 $450,000 ($15,000.00)

UnfavorableDM Purchase Price Variance

Actual Costs Flexible Budgetof DM Used SQA Valued at Std. Pr. BQA Valued at Std. Pr.

Aqu X Ap Aqu X Sp Sqa X Sp98,055 X $4.65 98,055 X $4.50

$455,956 $441,247.50 $430,041.15 ($14,708.25) ($11,206.35) $6,548.85

Unfavorable Unfavorable FavorableDM Price Variance DM Usage Variance DM Sales-Volume Variance

($25,914.60)($25,914.60) $6,548.85

Unfavorable FavorableDM Flexible Budget Variance DM Sales-Volume Variance

($19,365.75)

approach. In January 2014, the standard direct material cost is $45 per unit and the standarddirect manufacturing labor cost is $15 per unit. Due to more efficient operations, the standardquantities for February 2014 are set at 0.980 of the standard quantities for January. In March 2014,the standard quantities are set at 0.990 of the standard quantities for February 2014. Assume the

2014 are .980 of the January standard

are .990 of the February standard

9,850 X 9.702 X $4.50 10,000

($19,365.75)Unfavorable

DM Static Budget Variance

Actual Costs Flexible Budgetof DML Incurred SQA Valued at Std. Pr. BQA Valued at Std. Pr.

Aqu X Ap Aqu X Sp Sqa X SpDL 4,900 X $31.50 4,900 X $30

$154,350 $147,000 $143,318 ($7,350.00) ($3,682.50) $2,182.50 Unfavorable Unfavorable Favorable

DML Rate Variance DML Efficiency Variance DM Sales-Volume Variance

($11,032.50)($11,032.50) $2,182.50

Unfavorable FavorableDML Flexible Budget Variance DML Sales-Volume Variance

($8,850.00)($8,850.00)Unfavorable

DML Static Budget Variance

When continuous improvement is used, standards are set tighter in every future period.

9,850 X .485 X $30 10,000

Static BudgetBQA Valued at Std. Pr.

Bqa X Bp

$436,590



10,000 X 9.702 X $4.50

Static BudgetBQA Valued at Std. Pr.

Bqa X Bp

$145,500



10,000 X.485 X $30

Exercise 7-20: Flexible-budget and sales volume variances, market-share and market-size variances.Given:Luster, Inc., produces the basic fillings used in many popular frozen desserts and treats -- vanillaand chocolate ice creams, puddings, meringues, and fudge. Luster uses standard costing andcarries over no inventory from one month to the next. The ice-cream product group's results forJune 2014 were as follows:

Performance Report Actual Staticfor June, 2014 Results BudgetUnits (pounds) 350,000 335,000 Revenues $5.75 $2,012,500 $1,976,500 $5.90 Var. mfg. costs 3.25 1,137,500 1,038,500 3.10 Contribution margin $2.50 $875,000 $938,000 $2.80

$2.50 ($63,000) 3.187% $2.80

Sam Adler, the business manager for ice-cream products, is pleased that more pounds of ice creamwere sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs

Sam Adler would also like to analyze how the company is performing compared to the overall market

1,340,000

1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, andcontribution margin. What percentage is each static-budget variance relative to its static-budgetamount?

2. Break down each static-budget variance into a flexible-budget variance and a sales-volume variance.

Actual StaticOperating Flexible Sales Budget

Income Budget Adjusted Volume Static VarianceActual Variance Budget Variance Budget (SBV)

Units sold 350,000 0 350,000 15,000 335,000 15,000

Sales $2,012,500 ($52,500) $2,065,000 $88,500 $1,976,500 $36,000

Variable manufacturing costs 1,137,500 (52,500) 1,085,000 (46,500) 1,038,500 (99,000)

Contribution Margin $875,000 ($105,000) $980,000 $42,000 $938,000 ($63,000)

Actual SP/unit $5.75 ($105,000) $42,000 $5.90 Budgeted SP/unit

Actual CM/unit $2.50 Unfavorable Favorable $2.80 Budgeted CM/unitFlexible-Budget Variance Sales-Volume Variance

($63,000)($63,000)

UnfavorableStatic-Budget Variance

3. Calculate the selling price variance.

0.32 0.32

0.25 0.25

Actual Market Size Actual Market SizeActual Market. Share Actual Market Share

went up too. The bottom line is that contribution margin declined by $63,000 or slightly more than 3% of the budgeted revenues of $1,976,500. Overall, Adler feels that the business is running fine.

for ice-cream products. He knows that the expected total market for ice-cream products was1,340,000 pounds and that the actual total market was 1,093,750 pounds.

Actual market share = 350,000/1,093,750 =Budgeted market share = 335,000/1,340,000 =

Actual SP/Unit Budgeted SP/Unit

$2,012,500 $2,065,000 ($52,500)($52,500)

Selling Price Variance(part of the flexible-budget variance)

Unfavorable

4. Calculate the market-share and market-size variance

Actual Market Size Actual Market Size Actual Market Size Budgeted Market SizeActual Market. Share Actual Market Share Budgeted Market Share Budgeted Market Share

Actual CM/Unit Budgeted CM/Unit Budgeted CM/Unit Budgeted CM/Unit

273,437.50 X $2.80$875,000 $980,000 $765,625 $938,000

($105,000) $214,375 ($172,375)Flexible-Budget Variance Market-share Variance Market-size Variance

Unfavorable Favorable Unfavorable

$42,000 ($105,000) $42,000

Flexible-Budget Variance Sales-volume VarianceUnfavorable Favorable

($63,000)($63,000)

Static-Budget VarianceUnfavorable

5. Assume the role of the management accountant at Luster. How would you presentthe results to Sam Adler? Should he be more concerned? If so, why?

Analysis of the unfavorable flexible-budget variances reveals that actual selling prices were lower than budgeted and actual variable costs per unit were higher than budgeted. Both components of unit CM are moving in the wrong direction. A favorable sales volume variance helped to offset this unfavorable decrease in contribution margin of $105,000 by $42,000. Furthermore, this favorable sales-volume

variance, Is Luster's market share growth due to competition exiting a declining market?

C/MStatic-Budget Variance

C/M ($63,000) C/MFlexible-Budget Variance Unfavorable Sales-volume Variance

($105,000) Unfavorable $42,000 Sales-price Var. ($52,500) Unfavorable Favorable $214,375 Market-share Variance

Var. Cost Pr. Var. ($52,500) Unfavorable Unfavorable ($172,375) Market-size Variance

Adler should analyze why each of these variances occurred and the relationships amongthem.

Why was the selling price decreased?Our choice?

1,093,750 X .32 X $5.75 1,093,750 X .32 X $5.90350,000 X $5.75 350,000 X $5.90

1,093,750 X .32 X $2.50 1,093,750 X .32 X $2.80 1,093,750 X .25 X $2.80 1,340,000 X .25 X $2.80350,000 X $2.50 350,000 X $2.80 335,000 X $2.80

can be broken in a $214,375 favorable market-share variance and a $172,375 unfavorable market-size

Market driven?

Can the efficiency of variable manufacturing costs be improved?

What caused the market-share variance?Lower sales price?Better quality product?Decreased competition?Better marketing/sales efforts?

What are the implications of the unfavorable market-size variance?Is the industry in decline?

Temporary?Permanent?Is competition exiting?

Is the economy in decline?

Exercise 7-20: Flexible-budget and sales volume variances, market-share and market-size variances.

Luster, Inc., produces the basic fillings used in many popular frozen desserts and treats -- vanillaand chocolate ice creams, puddings, meringues, and fudge. Luster uses standard costing andcarries over no inventory from one month to the next. The ice-cream product group's results for

3.187%

Sam Adler, the business manager for ice-cream products, is pleased that more pounds of ice creamwere sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs

Sam Adler would also like to analyze how the company is performing compared to the overall market

1,093,750

contribution margin. What percentage is each static-budget variance relative to its static-budget

2. Break down each static-budget variance into a flexible-budget variance and a sales-volume

SBVas a % ofthe StaticBudget4.48%

1.82%

-9.53%

-6.72%

Budgeted SP/unit

Budgeted CM/unit

or slightly more than . Overall, Adler feels that the business is running fine.

Budgeted Market SizeBudgeted Market Share

Budgeted CM/Unit

Analysis of the unfavorable flexible-budget variances reveals that actual selling prices were lower than budgeted and actual variable costs per unit were higher than budgeted. Both components of unit CM are moving in the wrong direction. A favorable sales volume variance helped to offset this unfavorable decrease in contribution margin of $105,000 by $42,000. Furthermore, this favorable sales-volume

Market-share Variance

Market-size Variance

1,340,000 X .25 X $2.80335,000 X $2.80

unfavorable market-size

Exercise 7-39Given:Sonnet, Inc. has the following budgeted standards for the month of March 2011:

1,500,000 Budgeted March items: Per Diskette

Average selling price per diskette $6.00 $6.00 Total direct material cost per diskette $1.50 ($1.50)Average labor productivity rate (diskettes per hour) 300 Direct manufacturing labor cost per hour $12.00 ($0.04)Direct marketing cost per unit $0.30 ($0.30)Fixed overhead $800,000 Budgeted March sales (diskettes) 1,500,000 Total industry market for this product (diskettes) 7,500,000 Budgeted CM per unit $4.16

1,425,000 Actual March results: Per Diskette

Unit sales realized as a % of budgeted amount 95%Average selling price increased to $6.10 $6.1000 Total direct material cost per diskette $1.60 ($1.6000)Labor productivity dropped to 250 diskettes per hour 250 Direct manufacturing labor cost per hour $12.20 ($0.0488)Direct marketing costs/unit $0.25 ($0.2500)Fixed costs incurred were more than budgeted by $10,000 Industry market sales was 8,906,250 Actual CM per unit $4.2012

Required:1. Calculate the static-budget and actual operating incomes.3. Calculate the flexible-budget for operating income.

Actual OperatingIncome Flexible-Budget Flexible

Actual (AXA) Variance Budget (AXS)Units sold 1,425,000 0 1,425,000 Sales $8,692,500 $142,500 $8,550,000 Variable Costs

Direct materials costs $2,280,000 ($142,500) $2,137,500 Direct manufacturing labor 69,540 (12,540) 57,000

Direct marketing costs 356,250 71,250 427,500

Total Variable Costs $2,705,790 ($83,790) $2,622,000 Contribution Margin $4.1600 $4.2012 $5,986,710 $58,710 $5,928,000 Fixed Costs 810,000 ($10,000) 800,000 Operating Income $5,176,710 $48,710 $5,128,000

(1) (4) (3)$48,710 $48,710

4. Calculate the total flexible-budget variance for operating income.5. Calculate the total sales-volume variance for operating income2. Calculate the total static-budget variance for operating income.

FavorableFlexible-Budget Variance Sales-Volume Variance

(2)($263,290)

($263,290)Unfavorable

Static-Budget Variance

(Expanded) BQA for Actual Level of ProductionActual Market Size Actual Market Size

Units sold 1,425,000 Actual Market Share 0.16 Actual Market Share

Actual market size 8,906,250 Actual CM/Unit Budgeted CM/UnitActual market share 0.16Budgeted sales units 1,500,000 $5,986,710 $58,710 $5,928,000 Budgeted market size 7,500,000 $58,710 Budgeted mkt. share 0.20 Flexible-Budget Variance Market-share Variance

Favorable

$58,710 Flexible-Budget Variance

Favorable($253,290)($253,290)


7. Calculate the price and efficiency variances for direct manufacturing labor8. Calculate the flexible-budget variance for direct manufacturing labor

Actual Costs Actual Input Qty.(AQ X AP) X Budgeted Price

(1,500,000 X .95)/250 X $12.20 (1,500,000 X .95)/250 X $12 (1,500,000 X .95)/300 X $12Direct manufacturing labor $69,540 $68,400

($1,140) ($11,400)Unfavorable Unfavorable

Price (Rate) Variance Efficiency Variance(7) (7)

($12,540)($12,540)

UnfavorableFlexible-Budget Variance

(8)($9,540)($9,540)


NOT IN TEXTBOOK:

Direct manufacturing labor Actual Market Size Actual Market Size

6. Calculate the market share, market size, sales-volume variance, and flexible-budget variances.

8,906,250 X .16 X $4.2012 8,906,250 X .16 X $4.16

Actual Market Share Actual Market Share Actual Market ShareActual input ratio Actual input ratio Budgeted input ratio

Actual Cost Budgeted Cost$69,540 ($1,140) $68,400 ($11,400)

(8906250*0.16)/250*12.2 (8906250*0.16)/250*12 (8906250*0.16)/300*12Price (Rate) Variance Efficiency Variance

($12,540)Flexible-Budget Variance


Sales-Volume StaticVariance Budget

(75,000) 1,500,000 ($450,000) $9,000,000

$112,500 $2,250,000 3,000 60,000

22,500 450,000

$138,000 $2,760,000

($312,000) $6,240,000 $0 800,000

($312,000) $5,440,000

(5) (1)($312,000)($312,000)

UnfavorableSales-Volume Variance


BQA for Actual Level of Production Static BudgetActual Market Size Budgeted Market Size

Budgeted Mkt. Share 0.20 Budgeted Mkt. Share

Budgeted CM/Unit Budgeted CM/Unit

$7,410,000 $6,240,000 ($1,482,000) $1,170,000

Market-share Variance Market-size Variance

Unfavorable Favorable

($312,000)Sales-volume Variance

Unfavorable($253,290)($253,290)


Flexible StaticBudget (BQAXS) Budget

(1,500,000 X .95)/300 X $12 1,500,000/300 X $12$57,000 $60,000

$3,000 Favorable

Sales-VolumeVariance

$3,000 Favorable

Sales-Volume variance

($9,540)($9,540)


Actual Market Size Actual Market Size Budgeted Market Size size

8,906,250 X .16 X $4.16 8,906,250 X .20 X $4.16 7,500,000 X .20 X $4.16

Actual Market Share Budgeted Mkt. Share Budgeted Mkt. Share shareBudgeted input ratio Budgeted input ratio Budgeted input ratio Efficiency

Budgeted Cost Budgeted Cost Budgeted Cost Price$57,000 $14,250 $71,250 ($11,250) $60,000

(8906250*0.16)/300*12 (8906250*0.2)/300*12 (7500000*0.2)/300*12Market-share Variance Market-size Variance

$3,000 Sales-Volume variance

($9,540)Static-Budget Variance

8,906,250 0.16

0.0033333333333333 1/3004,750 57000

Exercise 7-35 Direct materials efficiency, mix, and yield variances.

Given:Nature's Best Nuts produces specialty nut products for the gourmet and natural foods market.Its most popular product is Zesty Zingers, a mixture of roasted nuts that are seasoned with asecret spice mixture, and sold in one-pound tins. The direct materials used in Zesty Zingers are

and budgeted prices of direct materials are as follows:

Quantityper 100 Input in Input Price per Cost per

tin batch Cups Mix cup BatchAlmonds 180 30% $1.00 $180 Cashews 300 50% $2.00 $600 Pistachios 90 15% $3.00 $270 Seasoning 30 5% $6.00 $180 Budgeted Total 600 100% $1,230 $2.05 cost/cup 6 cups = 1 tin

$12.30 cost/tin $12.30

Changing the standard mix of direct material quantities slightly does not significantly affect theoverall end product, particularly for the nuts. In addition, not all nuts added to production endup in the finished product, as some nuts are rejected during inspection.

following actual quantity, cost, and mix of inputs:

Quantity

batches -- Actual Actual Total Price perCups Mix Price cup

Almonds 5,280 33% $5,280 $1.00 Cashews 7,520 47% $15,040 $2.00 Pistachios 2,720 17% $8,160 $3.00 Seasoning 480 3% $2,880 $6.00 Actual Total 16,000 100% $31,360 $1.96 cost/cupAllowed 15,000 15,000 $12.544 cost/tin

6.40 cups = 1 tinRequired:1. $30,750 2. Calculate the total direct materials efficiency variance. $610 3. Why is the total direct materials price variance zero? Actual prices per cup = Budgeted prices per cup4. Calculate the total direct materials mix and yield variances. ($1,440) F Mix Var.

16,000 16,000 16,000 Actual Quantity Actual Quantity Actual Quantity

Actual Mix Actual Mix Budgeted MixActual Price Budgeted Price Budgeted Price

Almonds $5,280 $0 F $5,280 $480 U $4,800 Cashews $15,040 $0 F $15,040 ($960) F $16,000 Pistachios $8,160 $0 F $8,160 $960 U $7,200 Seasoning $2,880 $0 F $2,880 ($1,920) F $4,800 Total $31,360 $0 $31,360 ($1,440) F $32,800

Price Var. Mix Var.($1,440) F

almonds, cashews, pistachios, and seasoning. For each batch of 100 tins, the budgeted quantities

In the current period, Nature's Best made 2,500 tins of Zesty Zingers in 25 batches with the

Used for 25

2,500 tins

What is the budgeted cost of direct materials for the 2,500 tins?

Almonds $5,280 $0 F $5,280 $780 Cashews $15,040 $0 F $15,040 $40 Pistachios $8,160 $0 F $8,160 $1,410 Seasoning $2,880 $0 F $2,880 ($1,620) Total $31,360 $0 $31,360 $610

Price Var. Efficiency Var.$610 $610

$610

1. Price $0 $0 2. Efficiency $610 U 1. Mix ($1,440) F

2. Yield $2,050 U

$610 $610 U

What are the mix and yield variances telling you about the 2,500 tins produced this period?

relatively more of less expensive ingredients than planned. In this case, the actual mix contains slightly more almonds and pistachios, while using fewer cashews and substantially less seasoning.

input to produce 2,500 tins of output when the budgeted amount of input was only 15,000 cups (600 X 25 = 15,000).

Are the variances large enough to investigate?

The direct materials yield variance is probably significant enough to be investigated. Inputs were up (16,000 - 15,000)/15,000 = 6.7% in total.

The mix variance, although smaller, should be monitored since it is favorable largely due to the use of less seasoning, which is probably considered an important element of the product's appeal to customers. Note the cost savings by replacing relatively expensive seasoning with almonds and pistachios.

Mix % of Actual Budgeted Price PerVariance Budget Mix Mix Cup

Almonds U $480 10.00% 33% 30% $1.00 Cashews F ($960) -6.00% 47% 50% $2.00 Pistachios U $960 13.33% 17% 15% $3.00 Seasoning F ($1,920) -40.00% 3% 5% $6.00 Total F ($1,440) -4.39% 100% 100%

Added Data: Not in your text.Actual Industry Size 25,000 TinsActual market share 0.10 2,500 Budgeted Industry Size 30,000 Budgeted market share 0.08 2,400

16,000 16,000 16,000 15,000 Actual Market Size Actual Market Size Actual Market Size Actual Market Size

Actual Market Share Actual Market Share Actual Market Share Actual Market ShareActual input ratio Actual input ratio Actual input ratio Budgeted input ratio

Actual Mix Actual Mix Budgeted Mix Budgeted MixActual Cost Budgeted Cost Budgeted Cost Budgeted Cost25,000 25,000 25,000 25,000

Total Variance: Actual Cost - Budgeted Costs

The direct materials mix variances totaling $1,440 F indicates that the actual product mix uses

The direct materials yield variances totaling $2,050 U is the result of needing 16,000 cups of

0.10 0.10 0.10 0.106.40 6.40 6.40 633% 33% 30% 30%

$1.00 $1.00 $1.00 $1.00 Almonds $5,280 $0 $5,280 $480 $4,800 $300 $4,500

Price Mix YieldActual Market Size Actual Market Size Actual Market Size Actual Market Size



0.10 0.10 0.10 0.106.40 6.40 6.40 647% 47% 50% 50%

$2.00 $2.00 $2.00 $2.00 Cashews $15,040 $0 $15,040 ($960) $16,000 $1,000 $15,000




0.10 0.10 0.10 0.106.40 6.40 6.40 617% 17% 15% 15%

$3.00 $3.00 $3.00 $3.00 Pistachios $8,160 $0 $8,160 $960 $7,200 $450 $6,750




0.10 0.10 0.10 0.106.40 6.40 6.40 63% 3% 5% 5%

$6.00 $6.00 $6.00 $6.00 Seasoning $2,880 $0 $2,880 ($1,920) $4,800 $300 $4,500

Price Mix Yield

Total $31,360 $0 $31,360 ($1,440) $32,800 $2,050 $30,750 Price Mix Yield

$0 $610 Total $31,360 Price $31,360 Efficiency Variance $30,750

$610 Total $31,360 Flexible-Budget Variance $30,750

$1,840 Total $31,360 Static-Budget Variance

Actual Market SizeActual Market Share

Budgeted Aver. CM per UnitTins 25,000

0.10Tins $12.30

Text Total Method $30,750

6 cups = 1 tin

UActual prices per cup = Budgeted prices per cup Actual Market Size 25,000

$2,050 U Yield Var. Actual Market Share 0.10 Budgeted input ratio 6

15,000 15,000 Actual Quantity Budgeted Quantity AllowedBudgeted Mix Budgeted Mix

Budgeted Price Budgeted Price$300 U $4,500 0.06666667

$1,000 U $15,000 0.06666667 1.066667 0.06666667$450 U $6,750 0.06666667$300 U $4,500 0.06666667

$2,050 U $30,750 0.06666667Yield Var.

$2,050 U$2,050 U$2,050 U

tins, the budgeted quantities

U $4,500 U $15,000 U $6,750 F $4,500 U $30,750

Efficiency Var.UU

contains slightly more almonds and pistachios, while using fewer cashews and substantially

$2,050 input to produce 2,500 tins of output when the budgeted amount of input was only 15,000 cups or

$2,050 2,500 tins (planned output)2,666.667 output based on input

166.667 lost output$12.30 cost/tin

The direct materials yield variance is probably significant enough to be investigated. Inputs $2,050.00 extra cost

The mix variance, although smaller, should be monitored since it is favorable largely due

12,000 14,400 Actual Market Size Actual Market Size Budgeted Market Size Mkt. Size

Actual Market Share Budgeted Mkt. Share Budgeted Mkt. Share Mkt. ShareBudgeted input ratio Budgeted input ratio Budgeted input ratio Yield

Budgeted Mix Budgeted Mix MixBudgeted Cost Budgeted Cost Budgeted Cost Price

25,000 30,000

totaling $1,440 F indicates that the actual product mix uses

totaling $2,050 U is the result of needing 16,000 cups of

0.08 0.086 6

30% 30%$1.00 $1.00

$900 $3,600 ($720) $4,320 $960 Mkt. Share Mkt. Size

Actual Market Size Actual Market Size Budgeted Market Size Mkt. SizeActual Market Share Budgeted Mkt. Share Budgeted Mkt. Share Mkt. ShareBudgeted input ratio Budgeted input ratio Budgeted input ratio Yield


25,000 30,000 0.08 0.08

6 650% 50%

$2.00 $2.00 $3,000 $12,000 ($2,400) $14,400 $640

Mkt. Share Mkt. SizeActual Market Size Actual Market Size Budgeted Market Size Mkt. Size



25,000 30,000 0.08 0.08

6 615% 15%

$3.00 $3.00 $1,350 $5,400 ($1,080) $6,480 $1,680

Mkt. Share Mkt. SizeActual Market Size Actual Market Size Budgeted Market Size Mkt. Size



25,000 30,000 0.08 0.08

6 65% 5%

$6.00 $6.00 $900 $3,600 ($720) $4,320 ($1,440)

Mkt. Share Mkt. Size

$6,150 $24,600 ($4,920) $29,520 $1,840 Mkt. Share Mkt. Size $1,840

$1,230 $1,840 Sales-Volume Variance $29,520

$1,230 $1,840 Sales-Volume Variance $29,520

$1,840 $29,520

Actual Market Size Actual Market Size Budgeted Market SizeActual Market Share Budgeted Market Share Budgeted Mkt. Share

Budgeted Aver. CM per Unit Budgeted Aver. CM/Unit Budgeted Aver. CM/Unit25,000 30,000

0.08 0.08$12.30 $12.30

$6,150 $24,600 ($4,920) $29,520 Market MarketShare Size

Variance Variance

Exercise 7-30: Flexible budget, direct materials, and direct manufacturing labor variances.Given:Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following is from the static budget for 20011:

Actual ExpectedProduction and sales in units 5,500 6,000 Direct material used in pounds 70,400 72,000 Direct material cost per pound $9.50 $10.00 Total cost of direct material used $668,800 $720,000 Direct manufacturing labor hours 18,500 21,000 Direct manufacturing labor rate per hour $51.50 $50 Total direct manufacturing labor costs $952,750 $1,050,000 Total fixed costs $1,180,000 $1,200,000 Beginning/ending inventories $0 $0

Standard Standard StandardCost Element Quantity Price Cost

Direct Materials (pounds) 12 $10 $120 DML (hours) 3.5 $50 $175

No sales items.Cost Portion

Actual Flexible-Budget Flexible Sales-Volume StaticCosts Variance Budget Variance Budget

Direct Material 70,400 X $9.50 5,500 X 12 X $10 6,000 X 12 X $10$668,800 $660,000 $720,000

($8,800) $60,000 Unfavorable Favorable

$51,200 $51,200

FavorableStatic Budget Variance

Cost PortionActual Flexible-Budget Flexible Sales-Volume StaticCosts Variance Budget Variance Budget

Direct Mfg. Labor 18,500 X $51.50 5,500 X 3.5 X $50 6,000 X 3.5 X $50$952,750 $962,500 $1,050,000

$9,750 $87,500 Favorable Favorable

$97,250 $97,250


Cost PortionActual Flexible-Budget Flexible Sales-Volume StaticCosts Variance Budget Variance Budget

1. Calculate the sales-volume variance and flexible-budget variance (for operating income ??) for DM, DML, and Fixed Costs.

Fixed Costs $1,180,000 $1,200,000 $1,200,000 $20,000 $0

Favorable$20,000

$20,000 Favorable

Static Budget Variance

2. Calculate the price and efficiency variances for direct materials and direct manufacturing labor.12.8 66,000

Actual FlexibleCosts Price A X S Efficiency Budget

A X A Variance Variance SQA X SDirect Material 70,400 X $9.50 70,400 X $10 5,500 X 12 X $10

$668,800 $704,000 $660,000 $35,200 ($44,000)

Favorable Unfavorable

($8,800)($8,800)

UnfavorableFlexible-Budget

$51,200 $51,200


3.3636 19,250

Actual FlexibleCosts Rate A X S Efficiency Budget

A X A Variance Variance SQA X SDirect Mfg. Labor 18,500 X $51.50 18,500 X $50 5,500 X 3.5 X $50

$952,750 $925,000 $962,500

($27,750) $37,500 Unfavorable Favorable

$9,750 $9,750

FavorableFlexible-Budget

$97,250 $97,250


Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each

6,000 X 12 X $10

6,000 X 3.5 X $50

for operating income ??) for DM, DML, and Fixed Costs.


(Cost Portion)5,500 X 12 X $10 6,000 X 12 X $10

$720,000 $60,000

Favorable

$60,000 Favorable

Sales-Volume


(Cost Portion)5,500 X 3.5 X $50 6,000 X 3.5 X $50

$1,050,000 $87,500

Favorable

$87,500 Favorable

Sales-Volume

Exercise 7-29Given:FastGrocery.com, an online company that delivers groceries to its customers, has the following informationfor three finance activities in 2008:

Rate per unit of Cost DriverActivity Cost Static

Activity Level Driver Budget ActualReceivables Output unit Remittances $0.639 $0.800

Payables Batch Invoices $2.900 $2.850 Travel expenses Batch Travel claims $7.600 $7.450

The output measure is the number of deliveries, which is the same as the number of remittances.

Additional information:Static-Budget Actual

Amounts AmountsNumber of deliveries/remittances 1,000,000 945,000 Batch size in terms of deliveries

Payables 5 4.468Travel expenses 500 501.587

1. Calculate the flexible-budget variance for each activity in 2008.Cost Portion

Activity Actual Flexible-Budget Flexible Sales-VolumeLevel Costs Variance Budget Variance

945,000 X $.80 945,000 X $.639Receivables Unit $756,000 $603,855

# of deliveries $152,145 ($35,145)Unfavorable Favorable

$117,000 $117,000

UnfavorableStatic Budget Variance

Payables Batch 945,000/4.468 945,000/5# of payable batches 211,504 189,000 Cost Portion

Actual Flexible-Budget Flexible Sales-VolumeCosts Variance Budget Variance

$602,786 $548,100 $54,686 ($31,900)

Unfavorable Favorable$22,786 $22,786


Travel Expenses Batch 945,000/501.587 945,000/500# of travel-claim batches 1,884 1,890 Cost Portion

Actual Flexible-Budget Flexible Sales-VolumeCosts Variance Budget Variance

211,504 X $2.85 189,000 X $2.90

$14,036 $14,364 ($328) ($836)

Favorable Favorable($1,164)($1,164)Favorable

Static Budget Variance

2. Calculate the price and efficiency variances for each activity in 2008.

Activity ActualLevel Costs Rate A X S Efficiency

A X A Variance Variance945,000 X $.80 945,000 X $.639

Receivables Unit $756,000 $603,855 # of deliveries $152,145 $0

Unfavorable None$152,145 $152,145


Payables Batch 945,000/4.468# of payable batches 211,504

ActualCosts Rate A X S EfficiencyA X A Variance Variance

$602,786 $613,361.68 ($10,575) $65,262 Favorable Unfavorable

$54,686 $54,686


Travel Expenses Batch 945,000/501.587# of travel claim batches 1,884

ActualCosts Rate A X S EfficiencyA X A Variance Variance

$14,036 $14,319

1,884 X $7.45 1,890 X $7.60

211,504 X $2.85 211,504 X $2.90

1,884 X $7.45 1,884 X $7.60

($283) ($45)Favorable Favorable

($328)($328)

FavorableFlexible-Budget

FastGrocery.com, an online company that delivers groceries to its customers, has the following information

StaticBudget

1,000,000 X $.639$639,000

1,000,000/5200,000

StaticBudget

$580,000

1,000,000/500 2,000 Static

Budget

200,000 X $2.90

$15,200

Remittances allowed per delivery = 1Flexible Sales-Volume StaticBudget Variance Budget

SQA X S (Cost Portion)945,000 X 1 X $.639 1,000,000 X 1 X $.639

$603,855 $639,000 ($35,145)Favorable

($35,145)Favorable

Sales-Volume$117,000


945,000/5 1,000,000/5189,000 200,000

Flexible Sales-Volume StaticBudget Variance Budget

SQA X S (Cost Portion)

$548,100 $580,000 ($31,900)Favorable

($31,900)Favorable

Sales-Volume$22,786 $22,786


945,000/500 1,000,000/500 1,890 2,000 Flexible Sales-Volume StaticBudget Variance Budget

SQA X S (Cost Portion)

$14,364 $15,200

2,000 X $7.60

189,000 X $2.90 200,000 X $2.90

1,890 X $7.60 2,000 X $7.60

($836)Favorable

($836)Favorable

Sales-Volume($1,164)($1,164)


Name Score

Actual Costs Flexible Budget SQA Static (Original) Budgetof DML Incurred Flexible Budget AQU SQA Valued at Std. Pr. Budgeted Quantity at Std. Pr.

Aq X Ap Aq X Sp Sqa X Sp Bqa X Sp

(1) (2) (3)

(4)

(5)

Match the number in the chart with the variance name below by placing the appropriate number on the line in front of the variance name.

5 DML Static Budget Variance

3 DML Sales-Volume Variance

1 DML Rate Variance

2 DML Efficiency Variance

4 DML Flexible Budget Variance

Name Score

Actual Costs Flexible Budget SQA Static (Original) Budgetof DML Incurred Flexible Budget AQU SQA Valued at Std. Pr. Budgeted Quantity at Std. Pr.

Aq X Ap Aq X Sp Sqa X Sp Bqa X Sp

(3) (4) (5)

(2)

(1)


4 DML Efficiency Variance

2 DML Flexible Budget Variance

3 DML Rate Variance

5 DML Sales-Volume Variance

1 DML Static Budget Variance



Name Score



(1) (2) (3)

(4)

(5)


5 Static Budget Variance

3 Market-Size Variance

1 Sales Price Variance

2 Market- Share Variance

4 Sales Volume Variance

Name Score



(3) (4) (5)

(2)

(1)


4 Market- Share Variance

5 Market-Size Variance

3 Sales Price Variance

2 Sales Volume Variance

1 Static Budget Variance



Documents

[XLS]wl10/320C07.xls · Web viewTuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each Aqu X Ap DM Price Variance DM Sales-Volume