Dylan & Father operate a tax accounting practice with partners and staff members
ID: 2474456 • Letter: D
Question
Dylan & Father operate a tax accounting practice with partners and staff members. Each billable hour of partner time has a $540 budgeted price and $240 budgeted variable cost. Each billable hour of staff time has a budgeted price of $120 and a budgeted variable cost of $70. This month, the partnership budget called for 8,000 billable partner-hours and 35,550 staff-hours. Actual results were as follows: Partner revenue $ 4,004,000 7,600 hours Staff revenue $ 4,230,000 35,000 hours
Required: (a) Compute the sales price variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
(b) Compute the total sales activity variance. (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)
(c) Compute the total sales mix variance. (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)
(d) Compute the total sales quantity variance. (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)
Explanation / Answer
a.
Sales price variance = Actual revenue – (Standard price × Actual hours)
Partner = 4,004,000 – ($540 × 7,600)
= 4,004,000 – 4,104,000
= 100,000 U (since actual revenue is smaller)
Staff = 4,230,000 – ($120 × 35,000)
= 4,230,000 – 4,200,000
= 30,000 F (since actual revenue is higher)
Total sales variance = Partner + Staff = 100,000 U + 30,000 F = 70,000 U
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