Question

EZ-Tax is a tax accounting practice with partners and staff members. Each billable hour of partner time has a $580 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 $80. For the most recent year, the partnership budget called for 8,400 billable partner-hours and 33,700 staff-hours. Actual results were as follows:

 

      Partner revenue$4,492,000 7,900hoursStaff revenue$4,315,000 33,000hours

 

Required:

a. Compute the sales price variance. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

 

b. Compute the total sales activity variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

 

c. Compute the total sales mix variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

 

d. Compute the total sales quantity variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

 

Answer 1

a	Sales Price Variance	=	( Actual Price * Actual Qty Sold) - (Actual Qty Sold * Standard Price)
	Partners	=	$ 44,92,000.00 - (7,900 hrs * $ 580 per hr)
		=	$ 44,92,000.00 - $ 45,82,000.00
		=	$    90,000.00	U
	Staff	=	$ 43,15,000.00 - (33,000 hrs * $ 130 per hr)
		=	$ 43,15,000.00 - $ 42,90,000.00
		=	$    25,000.00	F
	Total	=	$    65,000.00	U
b	Total Sales Activity Variance	=	(Total actual sales volume at the budgeted mix - budgeted sales volume) * budgeted price
	Partners	=	(40900 * 8400/ 42100 -   8400) * $ 580
		=	( 8160 hrs - 8400 hrs ) * $ 580
		=	$ 139,200.00	U
	Staff	=	(40900 * 33700/ 42100 - 33700 ) * $ 130
		=	( 32740 hrs - 33700 hrs ) * $ 130
		=	$ 124,800.00	U
	Total	=	$ 264,000.00	U
c	Total Sales Mix Variance	=	(Actual Sales Volume - Total actual sales volume at the budgeted mix) * budgeted price
	Partners	=	(7900 hrs - 40900 * 8400/ 42100 hrs ) * $ 580
		=	( 7900 hrs - 8160 hrs) * $ 580
		=	$ 150,800.00	U
	Staff	=	(33000 hrs - 40900 * 33700/ 42100) * $ 130
		=	( 33000 hrs - 32740 hrs) * $ 130
		=	$    33,800.00	F
	Total	=	$ 117,000.00	U
d	Total Sales Quantity Variance	=	( Actual Quantity - Budgeted Quantity) * Budgeted Profit per unit
	Partners	=	( 7900 hrs - 8400 hrs ) * ( $ 580 - $ 290)
		=	500 hrs * $ 290
		=	$ 145,000.00	U
	Staff	=	( 33000 hrs - 33700 hrs ) * ( $ 130 - $ 80)
		=	700 hrs * $ 50
		=	$    35,000.00	U
	Total	=	$ 180,000.00	U