Total static budget variance 312000 u sales volume

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Total static-budget variance $312,000 U Sales-volume variance
Analysis of direct mfg. labor flexible-budget variance for Sonnet, Inc. for March 2011 Actual Costs Incurred (Actual Input Quantity × Actual Price) Actual Input Quantity × Budgeted Price Flexible Budget (Budgeted Input Quantity Allowed for Actual Output × Budgeted Price) Direct. Mfg. Labor (5,700 × $12.20) $69,540 (5,700 × $12.00) $68,400 (*4,750 × $12.00) $57,000 $1,140 U $11,400 U Price variance Efficiency variance * 1,425,000 units ÷ 300 direct manufacturing labor standard productivity rate per hour. 7. DML price variance = $1,140 U; DML efficiency variance = $11,400 U 8. DML flexible-budget variance = $12,540U $12,540 U Flexible-budget variance
7-40 (30 min.) Comprehensive variance analysis. 1. Computing unit selling prices and unit costs of inputs: Actual selling price = $2,502,500 ÷ 275,000 = $9.10 Budgeting selling price = $2,700,000 ÷ 300,000 = $9.00 = ( 29 Actual selling price × ( 29 Actual units sold = ($9.10/unit – $9.00/unit) × 275,000 units = $27,500 F 2., 3., and 4. The actual and budgeted unit costs are: Actual Budgeted Direct materials Cream Vanilla Extract Cherry $0.04 ($124,800 ÷ 3,120,000) 0.15 ($184,500 ÷ 1,230,000) 0.41 ($133,250 ÷ 325,000) $0.03 0.12 0.45 Direct manufacturing labor Preparing Stirring 15.00 ($77,500 ÷ 310,000) × 60 18.00 ($154,500 ÷ 515,000) × 60 14.40 18.00 The actual output achieved is 275,000 pounds of Cherry Star. The direct cost price and efficiency variances are: Actual Costs Incurred (Actual Input Quantity × Actual Price) (1) Price Variance (2)=(1)–(3) Actual Input Quantity × Budgeted Price (3) Efficiency Variance (4)=(3)–(5) Flex. Budget (Budgeted Input Quantity Allowed for Actual Output × Budgeted Price) (5) Direct materials Cream $ 124,800 $ 31,200 U $ 93,600 a $ 5,400 F $ 99,000 f Vanilla Extract 184,500 36,900 U 147,600 b 15,600 U 132,000 g Cherry 1 33,250 13,000 F 1 46,250 c 22,5 00 U 123,75 0 h $ 442,5 50 $ 55,1 00 U $ 387 ,450 $ 32,70 0 U $ 354,75 0 Direct manuf. labor costs Preparing $ 77,500 $ 3,100 U $ 74,400 d $ 4,800 F $ 79,200 i Stirring 1 54,500 0 1 54,500 e 6 ,000 U 148 ,500 j $ 232 ,000 $ 3,100 U $ 228 ,900 $ 1 ,200 U $ 227 ,700 a $0.03 × 3,120,000 = $93,600 f $0.03 × 12 × 275,000 = $99,000 b $0.12 × 1,230,000 = $147,600 g $0.12 × 4 × 275,000 = $132,000 c $0.45 × 325,000 = $146,250 h $0.45 × 1 × 275,000 = $123,750 d $14.40/hr. × (310,000 min. ÷ 60 min./hr.) = $74,400 i $14.40 × ((275,000× 1.2) ÷ 60) = $79,200 e $18.00/hr. × (515,000 min. ÷ 60 min./hr.) = $154,500 j $18.00 × ((275,000 × 1.8) ÷ 60) = $148,500
Comments on the variances include Selling price variance. This may arise from a general increase in input prices (cream and vanilla). The sales price increase could be an effort to maintain a target margin. It could also arise from an overall industry increase in sales prices. Material price variance. The increase in the price per ounce of cream and vanilla extract could arise from uncontrollable market factors or from poor contract negotiations by Iceland. The decrease in the price per ounce of cherry could arise from good negotiations, a quantity discount or a lower quality input. Material efficiency variance. For vanilla extract and cherry, usage is greater than budgeted. Possible reasons include lower quality inputs, use of lower quality workers, and the preparing and stirring equipment not being maintained in a fully operational mode. The favorable efficiency variance for cream could arise due to higher quality inputs (related to the unfavorable price variance) where less waste is experienced in the production process.

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