PR 23-2A Flexible Budgeting and Variance Analysis Obj. 1, 2, 3 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: Cocoa Sugar Standard Amount per Case Dark Chocolate Light Chocolate Standard Price per Pound 12 lbs. 8 lbs. $7.25 10 lbs. 0.50 hr. 14 lbs. 0.60 hr. 1.40 Dark Chocolate Light Chocolate Planned production 4,700 cases Standard labor rate $15.50 per hr. Standard labor time 11,000 cases $15.50 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, I Love My Chocolate Company had the following actual results: Dark Chocolate Light Chocolate Actual production (cases) 5,000 10,000 Actual Price per Pound Actual Pounds Purchased and Used Cocoa Sugar $7.33 1.35 140,300 188,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate $15.25 per hr. 2,360 Light chocolate 15.80 per hr. 6,120 Instructions 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: Answer a. Direct materials price, quantity, and total variance. Check Figure: Direct materials quantity variance, $(625) F 2. b. Direct labor rate, time, and total variance. Why are the standard amounts in part (1) based on the actual production for the year instead of the planned production for the year? 1. a. Direct Materials Variance Price variance: Actual price Cocoa Sugar $ 7.33 $ 1.35 Standard price (7.25) (1.40) Variance Actual quantity (lbs.) 140,300 188,000 Direct materials price variance/4(favorable) unfavorable $ 11,224 Quantity variance: Actual quantity used (lbs.) Total Standard quantity used (lbs.) Variance (lbs.) Standard price 140,300 (140,000) 188,000 (190,000) 300 (2,000) $7.25 $1.40 Direct materials quantity variance(favorable) unfavorable $ 2,175 $ (2,800) (625) Total direct materials cost variance(favorable) unfavorable Total direct materials cost variance: Actual cost Standard cost Total direct materials cost variance4(favorable) unfavorable Supporting calculations: Standard quantity used of cocoa: Cases produced Standard amount per case (lbs.) Total Standard quantity used of sugar: Cases produced Standard amount per case (lbs.) Total Dark Chocolate Light Chocolate Total b. Direct Labor Variance Rate variance: Actual rate Dark Chocolate Light Chocolate Total $ 15.25 $ Standard rate (15.50) 15.80 (15.50) Variance $ (0.25) Actual time 2,360 6,120 Direct labor rate variance (favorable) unfavorable $ (590) $ 1,836 $ 1,246 Time variance Actual tiime Standard time Variance Standard rate Direct labor time variance (favorable) unfavorable Total direct labor cost variance(favorable) unfavorable Total direct labor cost variance: Actual cost Standard cost Total direct labor cost variance(favorable) unfavorable 2,360 (2,500) 6,120 (6,000) (140) $15.50 $ (2,170) 120 $15.50 $ 1,860 (310)