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.