Question

EZ-Tax is a tax accounting practice with partners and staff members. Each billable hour of partner time has a $570 budgeted price and $280 budgeted variable cost. Each billable hour of staff time has a budgeted price of $140 and a budgeted variable cost of $90. For the most recent year, the partnership budget called for 8,800 billable partner-hours and 32,700 staff-hours. Actual results were as follows:

Partner revenue	$	4,584,000		8,200	hours
Staff revenue	$	4,505,000		32,000	hours

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 - standard price) * actual sales units

	Partner	Staff
Actual sales	8200	32000
Actual price	$559.02	$140.78
Standard price	$570	$140
Sales price variance	-$90,000.00	$25,000.00
Effect	U	F

b) Tota sale activity variance = sale mix variance + sale volume varaince

= -77840.96 + (-131159.04)

= -$209000 U

c) sales mix variance

	Partner	Staff
Actual sales	8200	32000
Actual price	$559.02	$140.78
Standard price	$570	$140
variable cost	280	90
Contribution margin	$290	$50
Standard qty	8800	32700
Sales mix	21.20%	78.80%
Sale quantities in proportion of sales mix	8524.3	31675.7
Difference	-324.3	324.3
Contribution margin	$290	$50
Variance	-$94,057.83	$16,216.87
Sales mix variance	-$77,840.96	U

d) Sales quantity variance

	Partner	Staff
Actual sales	8200	32000
Actual price	$559.02	$140.78
Standard price	$570	$140
variable cost	280	90
Contribution margin	$290	$50
Standard qty	8800	32700
Sales mix	21.20%	78.80%
Sale quantities in proportion of sales mix	8524.3	31675.7
Difference	-275.7	-1024.3
Contribution margin	$290	$50
Variance	-$79,942.17	-$51,216.87
Sales volume variance	-$1,31,159.04	U