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 Sugar 12 lb. 9 lb. 10 lb. 14 lb. Standard labor 0.3 hr. 0.4 hr. time Standard Price per Pound $4.3 0.6 Planned production Standard labor rate Dark Chocolate Light Chocolate 5,600 cases $13.5 per hr. 11,400 cases $13.5 per hr. I Love My Chocolate 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 (cases) Light Chocolate 11,900 Actual Pounds Purchased and Used 5,300 Actual Price per Pound Cocoa Sugar $4.4 0.55 Actual Labor Rate Dark chocolate $13.1 per hr. Light chocolate 13.9 per hr. Required: Check My Work 171,600 214,100 Actual Labor Hours Used 1,450 4,880 Previous Dark chocolate Light chocolate Required: $13.1 per hr. 13.9 per hr. 1,450 4,880 Prepare the following variance analyses for both chocolates and 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 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, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the actual spending from volume changes can be separated from efficiency and price variances. volume is different from the planned production. In this way, Feedback Check My Work Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit). Review how actual production is analyzed by using standard amounts. Check My Work Previous