Flexible budgeting and variance analysis OBJ. 1, 2, 3 I’m Really Cold Coat Company makes women’s and men’s coats. Both products require filler and lining material. The following planning information has been made available:

Standard Amount per Unit Women’s Coats Men’s Coats Standard Price per Unit Filler 4.0 lbs. 5.20 lbs. $2.00 per lb.

Liner 7.00 yds. 9.40 yds. 8.00 per yd.

Standard labor time 0.40 hr. 0.50 hr.

Women’s Coats Men’s Coats Planned production 5,000 units 6,200 units Standard labor rate $14.00 per hr. $13.00 per hr.

I’m Really Cold Coat Company does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, I’m Really Cold Coat Company experienced the following actual results:

Women’s Coats Men’s Coats Actual production 4,400 5,800 Actual Price per Unit Actual Quantity Purchased and Used Filler $1.90 per lb. 48,000 Liner 8.20 per yd. 85,100 Actual Labor Rate Actual Labor Hours Used Women's coats $14.10 per hr. 1,825 Men's coats 13.30 per hr. 2,800 The expected beginning inventory and desired ending inventory were realized.

Instructions 1. Prepare the following variance analyses for both coats and the total, based on the actual results and production levels at the end of the budget year:

a. Direct materials price, quantity, and total variance.

b. Direct labor rate, time, and total variance.

2. Why are the standard amounts in part (1) based on the actual production at the end of the year instead of the planned production at the beginning of the year?