Dylan & Father operate a tax accounting practice with partners and staff members
ID: 2484673 • Letter: D
Question
Dylan & Father operate a tax accounting practice with partners and staff members. Each billable hour of partner time has a $590 budgeted price and $290 budgeted variable cost. Each billable hour of staff time has a budgeted price of $130 and a budgeted variable cost of $70. This month, the partnership budget called for 8,800 billable partner-hours and 35,700 staff-hours. Actual results were as follows: Partner revenue $ 4,787,000 8,300 hours Staff revenue $ 4,575,000 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
Calculation of sales price variance:
Formula :
Sales Price Variance = Actual Sales Revenue - Standard Revenue of Actual Units Sold
Actual Sales Revenue = (4787000 + 4575000)
$9,362,000
Standard Revenue of Actual Units Sold = (8300 partner-hours * $590) + (35000 staff-hours * $130) =
$9,447,000
Sales price variance = 9362000 - 9447000 =
$ 85,000
U
b
Calculation of total sales activity variance:
Formula:
Sales Activity Variance = (Actual Unit Sold - Budgeted Unit Sales) x Standard Profit Per Unit
Actual Units sold :
Partner hours
8300
Staff Hours
35000
Budgeted Units sold :
Partner hours
8800
Staff Hours
35700
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Activity Variance:
Partner (8300-8800)*300 =
$ 150,000
U
Staff (35000-35700)*60 =
$ 42,000
U
Total Sales Activity Variance
$ 192,000
U
c
Calculation of total sales mix variance:
Formula :
Sales Mix Variance = (Actual Unit Sold - Unit Sales at Standard Mix) x Standard Profit Per Unit
Actual Units sold :
Partner hours
8300
Staff Hours
35000
Unit Sales at Standard Mix :
Partner hours (8300+35000)*8800 / (8800+35700)
8563
Staff Hours = (8300+35000) - 8563 =
34737
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Mix Variance:
Partner (8300-8563)*300=
$ 78,900
U
Staff (35000-34737)*60=
$ 15,780
F
Total Sales Mix Variance
$ 63,120
U
d
Calculation of total sales quantity variance:
Formula :
Sales Quantity Variance= (Budgeted sales - Unit Sales at Standard Mix) x Standard Profit per unit
Budgeted Units sold :
Partner hours
8800
Staff Hours
35700
Unit Sales at Standard Mix :
Partner hours (8300+35000)*8800 / (8800+35700)
8563
Staff Hours = (8300+35000) - 8563 =
34737
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Quantity Variance:
Partner (8800-8563)*300=
$ 71,100
U
Staff (35700-34737)*60=
$ 57,780
U
Total Sales Quantity Variance =
$ 128,880
U
a
Calculation of sales price variance:
Formula :
Sales Price Variance = Actual Sales Revenue - Standard Revenue of Actual Units Sold
Actual Sales Revenue = (4787000 + 4575000)
$9,362,000
Standard Revenue of Actual Units Sold = (8300 partner-hours * $590) + (35000 staff-hours * $130) =
$9,447,000
Sales price variance = 9362000 - 9447000 =
$ 85,000
U
b
Calculation of total sales activity variance:
Formula:
Sales Activity Variance = (Actual Unit Sold - Budgeted Unit Sales) x Standard Profit Per Unit
Actual Units sold :
Partner hours
8300
Staff Hours
35000
Budgeted Units sold :
Partner hours
8800
Staff Hours
35700
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Activity Variance:
Partner (8300-8800)*300 =
$ 150,000
U
Staff (35000-35700)*60 =
$ 42,000
U
Total Sales Activity Variance
$ 192,000
U
c
Calculation of total sales mix variance:
Formula :
Sales Mix Variance = (Actual Unit Sold - Unit Sales at Standard Mix) x Standard Profit Per Unit
Actual Units sold :
Partner hours
8300
Staff Hours
35000
Unit Sales at Standard Mix :
Partner hours (8300+35000)*8800 / (8800+35700)
8563
Staff Hours = (8300+35000) - 8563 =
34737
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Mix Variance:
Partner (8300-8563)*300=
$ 78,900
U
Staff (35000-34737)*60=
$ 15,780
F
Total Sales Mix Variance
$ 63,120
U
d
Calculation of total sales quantity variance:
Formula :
Sales Quantity Variance= (Budgeted sales - Unit Sales at Standard Mix) x Standard Profit per unit
Budgeted Units sold :
Partner hours
8800
Staff Hours
35700
Unit Sales at Standard Mix :
Partner hours (8300+35000)*8800 / (8800+35700)
8563
Staff Hours = (8300+35000) - 8563 =
34737
Standard Profit Per Unit:
Partner (590-290)
$ 300
Staff (130-70)
$ 60
Sales Quantity Variance:
Partner (8800-8563)*300=
$ 71,100
U
Staff (35700-34737)*60=
$ 57,780
U
Total Sales Quantity Variance =
$ 128,880
U
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