1. 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 Unit
   	Womens Coats		Mens Coats		Standard Price per Unit
   Filler	4.0 lbs.		5.20 lbs.		$2.00 per lb.
   Liner	7.00 yds.		9.40 yds.		8.00 per yd.
   Standard labor time	0.40 hr.		0.50 hr.

   	Womens Coats		Mens Coats
   Planned production	5,000 units		6,200 units
   Standard 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:

   	Womens Coats		Mens Coats
   Actual production	4,400		5,800
   	Actual Price per Unit		Actual Quantity Purchased and Used
   Filler	$1.90 per lb.		48,000
   Liner	8.20 per yd.		85,100
   	Actual Labor Rate		Actual Labor Hours Used
   Women's coats	$14.10 per hr.		1,825
   Men's coats	13.30 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, The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.direct materials quantity variance, and total variance.

   b. The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.Direct labor rate variance, The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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	$	Favorable Favorable Unfavorable
   	Direct materials quantity variance	$	Unfavorable Favorable Unfavorable
   	Total direct materials The difference between actual cost and the flexible budget at actual volumes.cost variance	$	Unfavorable Favorable Unfavorable
   b.	Direct labor rate variance	$	Favorable Favorable Unfavorable
   	Direct labor time variance	$	Favorable Favorable Unfavorable
   	Total direct labor cost variance	$	Favorable Favorable Unfavorable

   2. The variance analyses should be based on the

   • actual
   • standard
   amounts at standard
   • actual
   • standard
   volumes. The budget must flex with the volume changes. If the
   • actual
   • standard
   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
   • standard
   production. In this way, spending from volume changes can be separated from efficiency and price variances.

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