Reference no: EM13341335
Flexible Budgeting and Variance Analysis
Belgian Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:
Standard Amount per Case
Dark Chocolate Light Chocolate Standard Price per Pound
Cocoa 10 lbs. 7 lbs. $4.50
Sugar 8 lbs. 12 lbs. 0.65
Standard labor time 0.35 hr. 0.40 hr.
Dark Chocolate Light Chocolate
Planned production 4,200 cases 10,500 cases
Standard labor rate 514.50 per hr. $14.50 per hr.
Belgian Chocolate does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, Belgian Chocolate had the following actual results:
Dark Chocolate Light Chocolate
Actual production (cases) 4,000 11,000
Actual Price per Pound Actual Pounds Purchased and Used
Cocoa $4.60 117,500
Sugar 0.60 160,000
Actual Labor Rate Actual Labor Hours Used
Dark chocolate $13.90 per hr. 1,270
Light chocolate 14.90 per hr. 4,500
Required:
1. Prepare the following variance analyses for both chocolates and 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.
Use the minus sign to enter favorable variances as negative numbers.
a. Direct materials price variance: Direct materials quantity variance: Total direct materials cost variance:
b. Direct labor rate variance: Direct labor time variance: Total direct labor cost variance:
2. Why are the standard amounts in part (1) based on the actual production for the year instead of the planned production for the year?
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