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 lbs. 9 lbs. $4.40 Sugar 10 lbs. 14 lbs. 0.60 Standard labor time 0.3 hr. 0.4 hr. Dark Chocolate Light Chocolate Planned production 3,700 cases 10,000 cases Standard labor rate $14.50 per hr $14.50 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, 1 Love My Chocolate Company had the following actual results: Dark Chocolate Light Chocolate Actual production (cases) 3,500 10,400 Actual Price per Pound Actual Pounds Purchased and Used Cocoa $4.50 136,300 Sugar 0.55 176,100 Actual Labor Rate Actual Labor Hours Used Oled My Workers Check My Works remaining Actual Labor Rate Actual Labor Hours Used 960 Dark chocolate $14.10 per hr Light chocolate 14.90 per hr 4,260 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, Direct materials price variance Unfavorable Direct materials quantity variance Unfavorable Total direct materials cost variance Unfavorable 1,824 a. -625 1,199 b. Direct labor rate variance 1,246 Unfavorable Direct labor time variance -310 Unfavorable Total direct labor cost variance 936 Unfavorable 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 he separated from efficiency and price variances. eBook Dark chocolate $14.10 per hr 960 Light chocolate 14.90 per hr 4,260 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 tabor time varlance, and total variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number Direct materials price variance 1,824 Unfavorable Direct materials quantity variance -625 Unfavorable Total direct materials cost variance 1,199 Unfavorable a. b. Direct labor rate variance 1,246 Unfavorable Direct labor time variance -310 Unfavorable Total direct labor cost variance 936 Unfavorable 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. Revious Next