Question

1. In November of 20x1, when you make your annual budget for the calendar year, you budget $50 per month for pet food for your dog in 20X2. Then on May 1, 20X2 you get a second dog (who eats exactly as much as the first dog), and on August 1, 20X2 the price of dog food increases by 10%.
   1. What is your actual annual cost of pet food for 20X2?
   2. How much is the variance for the cost of pet food for 20X2?
   3. What percentage of the variance is due to getting the second dog?

Answer 1

Given the cost of pet food as budgeted is $50 per month

Hence for the full calendar year of 20x2 the budgeted cost of pet food will be

$50 * 12 = $600

Hence the final budgeted figure for pet food is $600

Now let us calculate the actual figures using the below table.

Month	Budgeted cost	Price Change	% Change	Cost for Dog -1	Cost for Dog -2
January	50	0	0	50	0
February	50	0	0	50	0
March	50	0	0	50	0
April	50	0	0	50	0
May	50	0	0	50	50
June	50	0	0	50	50
July	50	0	0	50	50
August	50	5	10%	55	55
September	50	5	10%	55	55
October	50	5	10%	55	55
November	50	5	10%	55	55
December	50	5	10%	55	55
Totals	600	25	-	625	425

a) The annual Cost for 20x2 is 625+425 = 1050

b) Variance for the cost of pet food is Change in cost/ Budgeted cost.

(1050-600)/600 = 450/600 = 75%

c) Amount Attributable to the second dog is 425/600 = 70.8333%

That means out of 75% variance 70.8333% is relating to the new dog ( around 70.8333/75 = 94.44%)