Actual total quantity of all inputs used actual input

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Actual Total Quantity of All Inputs Used × Actual Input Mix × Budgeted Price (1) Actual Total Quantity of All Inputs Used × Budgeted Input Mix × Budgeted Price (2) Flexible Budget: Budgeted Total Quantity of All Inputs Allowed for Actual Output × Budgeted Input Mix × Budgeted Price (3) Almonds 16,000 × 0.33 × $1 = $ 5,280 Cashews 16,000 × 0.47 × $2 = 15,040 Pistachios 16,000 × 0.17 × $3 = 8,160 Seasoning 16,000 × 0.03 × $6 = 2,880 $31,360 16,000 × 0.30 × $1 = $ 4,800 16,000 × 0.50 × $2 = 16,000 16,000 × 0.15 × $3 = 7,200 16,000 × 0.05 × $6 = 4,800 $32,800 15,000 × 0.30 × $1 = $ 4,500 15,000 × 0.50 × $2 = 15,000 15,000 × 0.15 × $3 = 6,750 15,000 × 0.05 × $6 = 4,500 $30,750 $1,440 F $2,050 U Total mix variance Total yield variance $610 U Total efficiency variance F = favorable effect on operating income; U = unfavorable effect on operating income. The direct materials mix variance of $1,440 F indicates that the actual product mix uses 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. The direct materials yield variance of $2,050 U occurs because the amount of total inputs needed (16,000 cups) exceeded the budgeted amount (15,000 cups) expected to produce 2,500 tins. The direct materials yield variance is significant enough to be investigated. The mix variance may be within expectations, but should be monitored since it is favorable largely due to the use of less seasoning, which is considered an important element of the product’s appeal to customers.
14-47 14-36 (35 min.) Direct labor variances: price, efficiency, mix and yield. 1. George ($30 × 6 hrs.) $ 180 Earl ($20 × 4 hrs.) 80 Cost per guitar $ 260 Number of guitars × 25 units Total budgeted cost $ 6,500 2. Solution Exhibit 14-36A presents the total price variance ($0), the total efficiency variance ($10 U), and the total flexible-budget variance ($10U). Total direct labor price variance can also be computed as: Direct labor price variance for each input = Actual Budgeted price of price of input input × Actual quantity of input George = ($30 – $30) × 145 = $0 Earl = ($20 – $20) × 108 = 0 Total direct labor price variance $0 Total direct labor efficiency variance can also be computed as: Direct labor efficiency variance for each input = ( ) Actual quantity Budgeted quantity of input of input allowed for actual output × Budgeted price of input George = (145 150) × $30.00 = $150 F Earl = (108 100) × $20.00 = 160 U Total direct labor efficiency variance $ 10 U
14-48 SOLUTION EXHIBIT 14-36A Columnar Presentation of Direct Labor Price and Efficiency Variances for Trevor Joseph Guitars Actual Costs Incurred (Actual Input Quantity × Actual Price) (1) Actual Input Quantity × Budgeted Price (2) Flexible Budget (Budgeted Input Quantity Allowed for Actual Output × Budgeted Price) (3) George 145 × $30 = $4,350 145 × $30 = $4,350 150 × $30 = $4,500 Earl 108 × $20 = 2,160 108 × $20 = 2,160 100 × $20 = 2,000 $6,510 $6,510 $6,500 $0 $10 U Total price variance Total efficiency variance $10 U Total flexible-budget variance F = favorable effect on operating income; U = unfavorable effect on operating income 3.

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