I Love My Chocolate Company makes dark chocolate and light chocolate. Both produ
ID: 2433598 • Letter: I
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 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:
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.
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. $4.40 Sugar 7 lbs. 11 lbs. 0.60 Standard labor time 0.3 hr. 0.4 hr.Explanation / Answer
1a) Direct Materials Variance Cocoa Sugar Total Price variance: Actual price $4.50 $0.55 Standard price $4.40 $0.60 Variance $0.10 -$0.05 Actual quantity 124500 174200 Direct materials price variance $12,450.00 U -$8,710.00 F $3,740.00 U Quantity variance: Actual quantity used 124,500 174,200 Standard quantity used (Note 1) 123,900 178,700 Variance 600 -4500 Standard price $4.40 $0.60 Direct materials quantity variance $2,640.00 U -$2,700.00 F -$60.00 F Total direct materials cost variance Actual cost $560,250.00 $95,810.00 Standard cost $545,160.00 $107,220.00 Total direct materials cost variance $15,090.00 U -$11,410.00 F $3,680.00 U Notes 1) Standard Quantity (9 lbs. × 5,100 actual production of dark chocolate) + (6 lbs. ×13,000 actual production of light chocolate) 123,900 97,500 = (7 lbs. × 5100 actual production of dark chocolate) + (11 lbs. × 13000 actual production of light chocolate) 178,700 2) Actual Cost $4.50 × 124,500 $560,250.00 $.55 × 174,200 $95,810.00 3) Standard Cost $4.40 x 123,900 545,160 $.60 x 178,700 107,220 b. Dark Light Direct Labor Variance Chocolate Chocolate Total Rate variance: Actual rate $14.10 $14.90 Standard rate $14.50 $14.50 Variance -$0.40 $0.40 Actual time 1390 5330 Direct labor rate variance -$556.00 F $2,132.00 U $1,576.00 U Time variance: Actual time 1390 5330 Standard time 1530.00 5200.00 Variance -140 130 Standard rate $14.50 $14.50 Direct labor time variance -$2,030.00 F $1,885.00 U -$145.00 F Total direct labor cost variance Actual cost $19,599.00 $79,417.00 Standard cost $22,185.00 $75,400.00 Total direct labor cost variance -$2,586.00 F $4,017.00 U $1,431.00 U Standard Rate 0.30 hr. × 5,100 actual production of dark chocolate 1530.00 0.40 hr. × 13,000 actual production of light chocolate 5200.00 Actual cost 1390 hrs. × $14.10 $19,599.00 5,330 hrs. × $14.90 $79,417.00 Standard Cost 1530 hrs. × $14.50 $22,185.00 5200 hrs. × $14.50 $75,400.00 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.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.