Flexible Budgeting and Variance Analysis Belgian Chocolate Company makes dark ch
ID: 2425267 • Letter: F
Question
Flexible Budgeting and Variance Analysis
Belgian Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:
Belgian Chocolate does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, Belgian Chocolate had the following actual results:
Required:
Prepare the following variance analyses for both chocolates and 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.
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.
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.
Standard Amount per Case Dark Chocolate Light Chocolate Standard Price per Pound Cocoa 9 lbs. 6 lbs. $5 Sugar 7 lbs. 11 lbs. 0.6 Standard labor time 0.3 hr. 0.4 hr.Explanation / Answer
direct material price variance
cocoa = 118200(5.1-5) = 11820 adverse
sugar = 162000(.6-.55) = 8100 favourable
total price variance = 3720 adverse
direcet material qualtity variance
cocoa = std quatity for actual output
= 5200*9 + 11800*6 = 117600
variance for cocoa = 5(118200-117600) = 3000 favourable
sugar std qty = 5200*7 + 11800*11 = 129800
variance = .6(162000-166200) = 2100 adverse
total direct materail quantity variance = 900 favourable
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