Question

Flexible Budgeting and Variance Analysis

I Love My 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	9 lbs.		6 lbs.		$4.60
Sugar	7 lbs.		11 lbs.		0.60
Standard labor time	0.3 hr.		0.4 hr.

	Dark Chocolate		Light Chocolate
Planned production	4,500 cases		9,800 cases
Standard labor rate	$13.00 per hr.		$13.00 per hr.

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

	Dark Chocolate		Light Chocolate
Actual production (cases)	4,300		10,200
	Actual Price per Pound		Actual Pounds Purchased and Used
Cocoa	$4.70		100,400
Sugar	0.55		138,700
	Actual Labor Rate		Actual Labor Hours Used
Dark chocolate	$12.60 per hr.		1,170
Light chocolate	13.40 per hr.		4,180

Required:

1. the following variance analyses for both chocolates and the 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.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a.	Direct materials price variance	$	Unfavorable
	Direct materials quantity variance	$	Unfavorable
	Total direct materials cost variance	$	Unfavorable
b.	Direct labor rate variance	$	Unfavorable
	Direct labor time variance	$	Favorable
	Total direct labor cost variance	$	Unfavorable

Answer 1

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I Love My Chocolate
Direct Material Variance	Price Per Pound	Pounds used	Amount
Cocoa	4.70	100,400.00	471,880.00
Sugar	0.55	138,700.00	76,285.00
Actual Price for Actual Quantity of Input			548,165.00	A
Cocoa	4.60	100,400.00	461,840.00
Sugar	0.60	138,700.00	83,220.00
Standard Price for Actual Quantity of Input			545,060.00	B
Cocoa (4300*9+10200*6)	4.70	99,900.00	469,530.00
Sugar (4300*7+10200*11)	0.55	142,300.00	78,265.00
Standard Price for Standard Quantity of Input			547,795.00	C
Price Variance (A-B)			3,105.00	Unfavorable
Quantity Variance (B-C)			(2,735.00)	Unfavorable
Total Variance (A-C)			370.00	Unfavorable
Direct Labor Variance
Dark Chocolate	12.60	1,170.00	14,742.00
Light Chocolate	13.40	4,180.00	56,012.00
Actual Price for Actual Quantity of Input			70,754.00	D
Dark Chocolate	13.00	1,170.00	15,210.00
Light Chocolate	13.00	4,180.00	54,340.00
Standard Price for Actual Quantity of Input			69,550.00	E
Dark Chocolate (4300*.3)	13.00	1,290.00	16,770.00
Light Chocolate (10200*.4)	13.00	4,080.00	53,040.00
Standard Price for Standard Quantity of Input			69,810.00	F
Price Variance (D-E)			1,204.00	Unfavorable
Quantity Variance (E-F)			(260.00)	Favorable
Total Variance (D-F)			944.00	Unfavorable