Question
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:
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. | $5.30 | |||
Sugar | 10 lbs. | 14 lbs. | 0.60 | |||
Standard labor time | 0.4 hr. | 0.5 hr. |
Dark Chocolate | Light Chocolate | |||
Planned production | 4,400 cases | 12,400 cases | ||
Standard labor rate | $13.00 per hr. | $13.00 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) | 4,200 | 12,900 | ||
Actual Price per Pound | Actual Pounds Purchased and Used | |||
Cocoa | $5.40 | 167,300 | ||
Sugar | 0.55 | 217,000 | ||
Actual Labor Rate | Actual Labor Hours Used | |||
Dark chocolate | $12.60 per hr. | 1,530 | ||
Light chocolate | 13.40 per hr. | 6,610 |
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. If there is no variance, enter a zero.
a. | Direct materials price variance | $ | |
Direct materials quantity variance | $ | ||
Total direct materials cost variance | $ | ||
b. | Direct labor rate variance | $ | |
Direct labor time variance | $ | ||
Total direct labor cost variance | $ |
2. The variance analyses should be based on the amounts at volumes. The budget must flex with the volume changes. If the 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 production. In this way, spending from volume changes can be separated from efficiency and price variances.
Direct Materials and Direct Labor Variance Analysis
Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 30 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:
Standard wage per hour | $13.8 |
Standard labor time per unit | 20 min. |
Standard number of lbs. of brass | 1.3 lbs. |
Standard price per lb. of brass | $10.5 |
Actual price per lb. of brass | $10.75 |
Actual lbs. of brass used during the week | 12,051 lbs. |
Number of units produced during the week | 9,000 |
Actual wage per hour | $14.21 |
Actual hours for the week (30 employees 36 hours) | 1,080 hrs. |
Required:
a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.
Direct materials standard cost per unit | $ |
Direct labor standard cost per unit | $ |
Total standard cost per unit | $ |
b. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Round your answers to the nearest whole dollar. 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 | $ | |
Total Direct Materials Cost Variance | $ |
c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Direct Labor Rate Variance | $ | |
Direct Labor Time Variance | $ | |
Total Direct Labor Cost Variance | $ |
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