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 Standard Price per Pound Dark Light Chocolate Chocolate 9 lb. 6 lb. 7 lb. 7 11 lb. Cocoa $5.4 0.6 Sugar Standard labor time 0.4 hr. 0.5 hr. Dark Chocolate Light Chocolate 12,800 cases Planned production 4,500 cases Standard labor $13 per hr. rate $13 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 Light Chocolate Actual production (cases) 4,300 13,300 Cocoa Actual Price Actual Pounds per Pound Purchased and Used $5.5 119,100 0.55 172,000 Actual Labor Actual Labor Hours Rate Used Sugar 1,570 Dark chocolate $12.5 per hr. Light 13.5 per hr. chocolate 6,820 Required: 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 $ 11,910 X Unfavorable Direct materials quantity variance $ 8,600 X Unfavorable Total direct materials cost variance $ 20,511 x Unfavorable b. Direct labor rate variance $ Direct labor time variance $ Total direct labor cost variance 2. The variance analyses should be based on the standard amounts at actual 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, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the actual production. In this way, spending from volume changes can be separated from efficiency and price variances