Question

1. The Accountant at EZ Toys, Inc. is analyzing the production and costs data for its Trucks

Division. For October, the actual results and the master budget data are presented below.

Actual Results

Budget Data

Produced and sold

10,000

Production and sales

12,000

Unit Selling Price

$15

Unit Selling Price

$15

Variable Costs:

Unit Variable Costs:

Direct materials

$52,800

Direct materials

$5

Direct labor

51,000

Direct labor

4

Variable OH

23,000

Variable OH

2

Total variable Costs $126,800

Total unit variable costs $11

Fixed Overhead

$9,000

Fixed Overhead

$9,600

Required: Prepare a variance analysis to compare actual results and master budget.

2. Required: Use the data above to determine the flexible budget variance and the sales volume

variance.

3. Required: Calculate the direct materials variances for October using the following

Information regarding the use of direct materials at EZ Toys’ Trucks Division for October:

Standard Costs

2 units per truck @ $2.5 per unit

Trucks produced in October = 10,000

Actual Materials purchased and used 22,000 units @ $2.4 per unit

4. Required: Calculate the direct labor variances for October using the following Information

regarding the use of direct labors at EZ Toys’ Trucks Division for October:

Standard Costs

0.4 hours per truck @ $10 per hour

Trucks produced in October = 10,000

Actual Direct Labor costs

Actual hours worked = 5,000 hours

Total actual labor cost = $51,000

Average cost per hour = $10.20

What might be causing these variance

Answer 1

Ques 1
	Acutal	Variance		Mater budget
Units	10000	2000	U	12000
Sales	150000	18000	U	168000	(12000*14)
Less:costs
Variable costs
Direct mat.	52800	7200	F	60000	(12000*5)
Direct Lab	51000	3000	U	48000	(12000*4)
VOH	23000	1000	F	24000	(12000*2)
Total variable costs	126800	5200	F	132000
contribution margin	23200	12800	U	36000
Fixed overhead	9000	600	F	9600
operating profit	14200	12200	U	26400
Ques 2
	Acutal	Flexible budget variances		Flexible budget	Sales volume variance		Mater budget
Units	10000			10000			12000
Sales	150000	10000	F	140000	28000	U	168000
Less:costs
Variable costs
Direct mat.	52800	2800	U	50000	10000	F	60000
Direct Lab	51000	11000	U	40000	8000	F	48000
VOH	23000	3000	U	20000	4000	F	24000
Total variable costs	126800	16800	U	110000	22000	F	132000
contribution margin	23200	12800	U	30000	6000	U	36000
Fixed overhead	9000	600	F	9600	0		9600
operating profit	14200	6200	U	20400	6000	U	26400
Ques 3
Actual costs = AQ * AP
Actual costs = 2.4*22000
Actual costs=	52800
Actual input at standard price
2.5*22000=	55000
Flexible production budget
std qt * std rate
2.5*20000	50000
So we have
price variance	2200	F
55000-52800=
Efficiency variance	5000	U
55000-50000
Total cost variance	2800	U
Ques 4
Actual costs = AH * AR
Actual costs =10.2*5000
Actual costs=	51000
Actual input at standard price
10*5000=	50000
Flexible production budget
std HRS * std rate
10*4000	40000
So we have
price variance	1000	U
55000-52800=
Efficiency variance	10000	U
50000-40000
Total cost variance	11000	U