MACC612 HOMEWORK - QUESTION-FRUITY VALLEY VINEYARDS & CELLARS STUDY UNIT: TOPIC: 1.3 BASIC VARIANCE ANALYSIS Fruity Valley Vineyards & Cellars (Pty) Ltd is a national company stationed in the Stellenbosch area. The cellar produce a Special Late Harvest wine from grapes purchased from vineyards in the surrounding areas. Processing of the grapes in wine includes a fermenting process after which the wine is bottled and matured in a unique way for one month before it is sold. Variable processing cost 750ml bottle Special Late Harvest is as follows: Direct material-Grapes: Direct material - Bottle: 1kg/bottle @ R5.00/kg 1 bottle R2.50/bottle R5.00 R2.50 Direct labour dlh/bottle @ R20.00/dlh R5.00 Variable processing overhead: dih @ R20,00/dih R5.00 Fixed processing overhead: Fixed processing overhead is budgeted at normal volume at R42 000 per month Budgeted maturing cost at normal volume totals to R18 000 per month, in total At the normal volume the cellar has 50 direct labourers employed, while the cellar operates for 20 days per month and 6 hours per day. Inventory levels and inventory valuation policy: Finished goods: Beginning inventory Ending inventory 1000 bottles wine 1 500 bottles wine Unfinished goods: Beginning inventory Ending inventory None 12 000 bottles wine Unfinished goods ending inventory consisted of processed and bottled wine that is being matured and completed 50% of the maturing process. These bottles were 100% completed regarding material, labour, variable overhead and processing cost. Direct material-Grapes: Direct material - Bottles No stock is kept. Beginning inventory Ending inventory None 750 bottles Bottles wine transferred out of the maturing process (completed): 12 000u. Inventory is valued at standard cost on a first-in-first-out basis. The company uses an absorption costing system for inventory valuation and reporting purposes. Sales and sales prices: The company uses a mark-up percentage of 100% on the standard absorption cost per bottle of wine to determine the sales price per bottle. Fruity Valley Vineyards and Cellars plans to sell 12 000 bottles of wine per month Other information for the month under review. Sales for the month totalled to 11 500u sold at an average price of R45.00 per bottle of wine. Opening stock finished goods was planned to be equal to the actual level of 1000 bottles of wine; but due to the lower actual sales quantity than planned, the planned quantity of closing stock finished goods was 500 bottles lower than the actual quantity of 1 500 bottles of wine as indicated above. 25 000 kilogram grapes were purchased at a cost of R130 000 25 000 bottles were purchased at a cost of R60 000 6 200 direct labour hours were actually worked, while the average labour rate per hour amounted to R21.00 being paid out for 6 300 hours. Variable processing cost totalled to R115 000 A cost saving of R2 000 incurred in the monthly budgeted fixed processing cost at normal volume Maturing cost totalled R20 000 for the month. Required: (1) Calculate as many variances as possible from the available information and clearly indicated whether a variance is favourable or unfavourable. (2) Calculate the over or under applied manufacturing overhead for each of the departments and in total or the company. (3) Using the over or under applied manufacturing overhead being calculated for each of the departments in (2) above, test whether the manufacturing overhead variances calculated in (1) above for each department are correct. MACC612 HOMEWORK - QUESTION-FRUITY VALLEY VINEYARDS & CELLARS STUDY UNIT: TOPIC: 1.3 BASIC VARIANCE ANALYSIS Fruity Valley Vineyards & Cellars (Pty) Ltd is a national company stationed in the Stellenbosch area. The cellar produce a Special Late Harvest wine from grapes purchased from vineyards in the surrounding areas. Processing of the grapes in wine includes a fermenting process after which the wine is bottled and matured in a unique way for one month before it is sold. Variable processing cost 750ml bottle Special Late Harvest is as follows: Direct material-Grapes: Direct material - Bottle: 1kg/bottle @ R5.00/kg 1 bottle R2.50/bottle R5.00 R2.50 Direct labour dlh/bottle @ R20.00/dlh R5.00 Variable processing overhead: dih @ R20,00/dih R5.00 Fixed processing overhead: Fixed processing overhead is budgeted at normal volume at R42 000 per month Budgeted maturing cost at normal volume totals to R18 000 per month, in total At the normal volume the cellar has 50 direct labourers employed, while the cellar operates for 20 days per month and 6 hours per day. Inventory levels and inventory valuation policy: Finished goods: Beginning inventory Ending inventory 1000 bottles wine 1 500 bottles wine Unfinished goods: Beginning inventory Ending inventory None 12 000 bottles wine Unfinished goods ending inventory consisted of processed and bottled wine that is being matured and completed 50% of the maturing process. These bottles were 100% completed regarding material, labour, variable overhead and processing cost. Direct material-Grapes: Direct material - Bottles No stock is kept. Beginning inventory Ending inventory None 750 bottles Bottles wine transferred out of the maturing process (completed): 12 000u. Inventory is valued at standard cost on a first-in-first-out basis. The company uses an absorption costing system for inventory valuation and reporting purposes. Sales and sales prices: The company uses a mark-up percentage of 100% on the standard absorption cost per bottle of wine to determine the sales price per bottle. Fruity Valley Vineyards and Cellars plans to sell 12 000 bottles of wine per month Other information for the month under review. Sales for the month totalled to 11 500u sold at an average price of R45.00 per bottle of wine. Opening stock finished goods was planned to be equal to the actual level of 1000 bottles of wine; but due to the lower actual sales quantity than planned, the planned quantity of closing stock finished goods was 500 bottles lower than the actual quantity of 1 500 bottles of wine as indicated above. 25 000 kilogram grapes were purchased at a cost of R130 000 25 000 bottles were purchased at a cost of R60 000 6 200 direct labour hours were actually worked, while the average labour rate per hour amounted to R21.00 being paid out for 6 300 hours. Variable processing cost totalled to R115 000 A cost saving of R2 000 incurred in the monthly budgeted fixed processing cost at normal volume Maturing cost totalled R20 000 for the month. Required: (1) Calculate as many variances as possible from the available information and clearly indicated whether a variance is favourable or unfavourable. (2) Calculate the over or under applied manufacturing overhead for each of the departments and in total or the company. (3) Using the over or under applied manufacturing overhead being calculated for each of the departments in (2) above, test whether the manufacturing overhead variances calculated in (1) above for each department are correct