Question
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
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 | Standard Price per Pound | ||||
Cocoa | 12 lb. | 8 lb. | $7.25 | |||
Sugar | 10 lb. | 14 lb. | 1.40 | |||
Standard labor time | 0.50 hr. | 0.60 hr. |
Dark Chocolate | Light Chocolate | |||
Planned production | 4,700 cases | 11,000 cases | ||
Standard labor rate | $15.50 per hr. | $15.50 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 | Light Chocolate | |||
Actual production (cases) | 5,000 | 10,000 | ||
Actual Price per Pound | Actual Pounds Purchased and Used | |||
Cocoa | $7.33 | 140,300 | ||
Sugar | 1.35 | 188,000 | ||
Actual Labor Rate | Actual Labor Hours Used | |||
Dark chocolate | $15.25 per hr. | 2,360 | ||
Light chocolate | 15.80 per hr. | 6,120 |
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: Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
- Direct materials price variance, direct materials quantity variance, and total variance.
- Direct labor rate variance, direct labor time variance, and total variance.
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