Dylan & Father operate a tax accounting practice with partners and staff members
ID: 2485187 • 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
Partner time
Budgeted price=$590
Budgeted variable cost=$290
Staff time
Budgeted price=$130
Budgeted variable cost=$70
8,800 billable partner-hours and 35,700 staff-hours
(Actual price - Budgeted price) x Actual unit sales = Selling price variance
Standard rate* Actual Hour Partner revenue 8300*590= 4897000
Staff revenue 35000*130=4550000
Total 9447000
Actual Revenue
Partner revenue 4787000
Staff revenue 4575000
Total 9362000
sales price variance 9447000-936000= 85000 unfavorable
(Actual units sold - Budgeted units sold) x Budgeted price per unit
= Sales volume variance
Standared rate* Standard Hour Partner revenue 8800*(590-230)= 3168000
Staff revenue 35700*(130-70)=2142000
Total 5310000 Standared rate* Actual Hour Partner revenue 8300*(590-230) 2988000
Staff revenue 35000*(130-70) 2100000
Total 5088000
sales activity variance
5310000-5088000= 222000 unfavorable
Sales Mix Variance = total units actually sold * (actual sales mix % - expected sales mix %) * expected contribution margin per unit
Total sales mix variance Mix Ratio
Partner revenue 8800/44500*100= 19.78%
Staff revenue 35700/44500*100= 80.22%
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