Did the sales volume increase because of a decrease

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Did the sales volume increase because of a decrease in selling price or because of growth in the overall market? Analysis of these questions would help Levine decide what actions he should take.
7-9 7-21 7-21 (20–30 min.) Price Price and and efficiency efficiency variances. variances. 1. The key information items are: Peterson budgets to obtain 4 pumpkin scones from each pound of pumpkin. The flexible-budget variance is $408 F. a 16,000 × $0.82 = $13,120 b 60,800 × 0.25 × $0.89 = $13,528 c 60,000 × 0.25 × $0.89 = $13,350 $1,120 F $712 U Price variance Efficiency variance $408 F Flexible-budget variance a 16,000 × $0.82 = $13,120 b 16,000 × $0.89 = $14,240 c 60,800 × 0.25 × $0.89 = $13,528 3. The favorable flexible-budget variance of $408 has two offsetting components: (a) favorable price variance of $1,120––reflects the $0.82 actual purchase cost being lower than the $0.89 budgeted purchase cost per pound. (b) unfavorable efficiency variance of $712––reflects the actual materials yield of 3.80 scones per pound of pumpkin (60,800 ÷ 16,000 = 3.80) being less than the budgeted yield of 4.00 (60,000 ÷ 15,000 = 4.00). The company used more pumpkins (materials) to make the scones than was budgeted. One explanation may be that Peterson purchased lower quality pumpkins at a lower cost per pound. Actual Budgeted Output units (scones) Input units (pounds of pumpkin) Cost per input unit 60,800 16,000 $ 0.82 60,000 15,000 $ 0.89 Actual Actual Results (1) (1) Flexible- Budget Variance (2) (2) = (1) (1) (3) (3) Flexible Flexible Budget (3) (3) Sales-Volume Sales-Volume Variance (4) (4) = (3) (3) (5) (5) Static Static Budget (5) (5) Pumpkin costs $13,120 a $408 F $13,528 b $178 U $13,350 c 2. Actual Actual Costs Costs Incurred (Actual Input Qty. × Actual Price) Actual Input Qty. × Budgeted Price Flexible Budget (Budgeted (Budgeted Input Input Qty. Allowed for Actual Output × Budgeted Price) $13,120 a $14,240 b $13,528 c
7-10 7-22 7-22 (15 min.) Materials Materials and and manufacturing manufacturing labor labor variances. variances. $14,000 F $11,000 F Price variance Efficiency variance $25,000 F Flexible-budget variance Direct $90,000 $86,000 $80,000 Mfg. Labor $4,000 U $6,000 U Price variance Efficiency variance $10,000 U Flexible-budget variance 7-23 (30 min.) Direct materials and direct manufacturing labor variances. 1. Actual Costs Incurred (Actual Input Qty. × Actual Price) Actual Input Qty. × Budgeted Price Flexible Flexible Budget Budget (Budgeted Input Qty. Allowed for Actual Output × Budgeted Price) Direct Materials $200,000 $214,000 $225,000 May 2009 Actual Results Price Variance Actual Actual Quantity Budgeted Price Efficiency Variance Flexible Budget (1) (1) (2) (2) = (1) (1) (3) (3) (3) (3) (4) (4) = (3) (3) (5) (5) (5) (5) Units 550 550 Direct materials $12,705.00 $1,815.00 U $10,890.00 a $990.00 U $9,900.00 b Direct labor $ 8,464.50 $ 104.50 U $ 8,360.00 c $440.00 F $8,800.00 d Total price variance $1,919.50 U Total efficiency variance $550.00 U a 7,260 meters $1.50 per meter = $10,890 b 550 lots 12 meters per lot $1.50 per meter = $9,900 c 1,045 hours $8.00 per hour = $8,360 d 550 lots 2 hours per lot $8 per hour = $8,800 Total flexible-budget variance for both inputs = $1,919.50U + $550U = $2,469.50U Total flexible-budget cost of direct materials and direct labor = $9,900 + $8,800 = $18,700 Total flexible-budget variance as % of total flexible-budget costs = $2,469.50 $18,700 = 13.21%
7-11 2.

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