Flexible Budgeting and Variance Analysis

I'm Really Cold Coat Company makes women's and men's coats. Both products require filler and lining material. The following planning information has been made available:

Standard Amount per UnitWomen's CoatsMen's CoatsStandard Price per UnitFiller4.0 lbs.5.20 lbs.$2.00 per lb.Liner7.00 yds.9.40 yds.8.00 per yd.Standard labor time0.40 hr.0.50 hr.

Women's CoatsMen's CoatsPlanned production5,000 units6,200 unitsStandard labor rate$14.00 per hr.$13.00 per hr.

I'm Really Cold Coat Company does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, I'm Really Cold Coat Company experienced the following actual results:

Women's CoatsMen's CoatsActual production4,4005,800Actual Price per UnitActual Quantity Purchased and UsedFiller$1.90 per lb.48,000Liner8.20 per yd.85,100Actual Labor RateActual Labor Hours UsedWomen's coats$14.10 per hr.1,825Men's coats13.30 per hr.2,800

The expected beginning inventory and desired ending inventory were realized.

Required:

1.Prepare the following variance analyses for both coats 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.

Round your answers to two decimal places, if necessary. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a.Direct materials price variance$Unfavorable

Direct materials quantity variance$Favorable

Total direct materialscost variance$Unfavorable

b.Direct labor rate variance$Unfavorable

Direct labor time variance$Favorable

Total direct labor cost variance$Unfavorable

2.The variance analyses should be based on thestandard

amounts atactual

volumes. The budget must flex with the volume changes. If theactual

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 theactual

production. In this way, spending from volume changes can be separated from efficiency and price variances.