Dylan & Father operate a tax accounting practice with partners and staff members
ID: 2484708 • 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 for partner and staff. (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 Sales Revenue - Standard Revenue in Actual Hours
Partner = 4,787,000 - (590 - 290)* 8,300
= 4,787,000 - 2,490,000 = 2297000 FAVOURABLE
Satff = 4,575,000 - ( 130-70 )* 35,000
= 4,575,000 - 2100000 = 2475000 FAVOURABLE
B. SALES ACTIVITY VARIANCE =(Actual Hours - Budgeted Hours) x Standard Contribution Per Unit
Standard Contribution Per Unit = Revenue - Variable Cost
Partner = (8,300 - 8800) x (300-290) = -5,000 UNFAVOURABLE
Staff = (35,000 - 35,700) x ( 60- 70) =7,000 FAVOURABLE
C. TOTAL SALES MIX VARIANCE =
(Actual Hours - Unit Hours at Standard Mix) x Standard Contribution Per Unit
Partner = (8300 - 8660) * 10 = - 3600 UNFAVOURABLE
Staff = ( 35,000 - 34,640 ) * ( 60- 70) = -3,600 UNFAVOURABLE
Standard mix ratio: 20% Partner and 80% Staff
Partner =8,800 / (8,800 + 35,700) % = 19.77 = 20%
Staff = 35,700 / (8,800 + 35,700)% = 80%
Hours in proportion to the standard mix
Total Hours during the period = 8,300 + 35,000 = 43,300
Unit Hours at Standard Mix:
Hours of Partner in standard mix @ 20% of 43,300 = 8660
Hours of Staff in standard mix @ 80% of 43,300 = 34,640
D. SALES quantity VARIANCE =(Actual Hours - Budgeted Hours) x Standard Contribution Per Unit
Standard Contribution Per Unit = Revenue - Variable Cost
Partner = (8,300 - 8800) x (300-290) = -5,000 UNFAVOURABLE
Staff = (35,000 - 35,700) x ( 60- 70) =7,000 FAVOURABLE
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.