Question
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
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:
- Direct materials price variance, direct materials quantity variance, and total variance.
- 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 materials cost 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 the standard amounts at actual volumes. The budget must flex with the volume changes. If the actual 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 production. In this way, spending from volume changes can be separated from efficiency and price variances.
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