Flexible Budgeting and Variance Analysis I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available: Standard Amount per Case Dark Chocolate Light Chocolate Cocoa 12 lbs. 9 lbs. Sugar 10 lbs. 14 lbs. Standard labor 0.3 hr. 0.4 hr. time Standard Price per Pound $4.80 0.60 Planned production Standard labor rate Dark Chocolate Light Chocolate 5,700 cases $16.50 per hr. 12,900 cases $16.50 per hr. I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results: Dark Chocolate Actual production Light Chocolate 13,400 5,400 (cases) Actual Price per Actual Pounds Purchased Pound and Used Cocoa Sugar $4.90 0.55 186,300 235,600 Actual Labor Rate Actual Labor Hours Used Dark chocolate $16.00 per hr. Light chocolate 17.00 per hr. 1,470 5,490 Required: 1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year: a. Direct materials price variance, direct materials quantity variance, and total variance. b. Direct labor rate variance, direct labor time variance, and total variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero. a. Direct materials price variance $ 4,130 X Direct materials quantity variance $ Total direct materials cost variance b. Direct labor rate variance Direct labor time variance Total direct labor cost variance $ $ $ Unfavorable Unfavorable Unfavorable Unfavorable Favorable Unfavorable amounts at actual 2. The variance analyses should be based on the standard volumes. The budget must flex with the volume changes. If the actual volume is different from the planned volume, as it was in this case, production. In this way, spending from volume changes can be separated from efficiency and then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the actual price variances.