Question

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	10 lbs.		7 lbs.		$4.60
Sugar	8 lbs.		12 lbs.		0.60
Standard labor time	0.4 hr.		0.5 hr.

	Dark Chocolate		Light Chocolate
Planned production	4,900 cases		11,700 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)	4,700		12,200
	Actual Price per Pound		Actual Pounds Purchased and Used
Cocoa	$4.70		133,100
Sugar	0.55		179,400
	Actual Labor Rate		Actual Labor Hours Used
Dark chocolate	$12.50 per hr.		1,710
Light chocolate	13.50 per hr.		6,250

Required:

1. Prepare 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

Cocoa

calculation of direct material price variance:

= (Standard price per unit of material - Actual price per unit of material) × Actual quantity

= ($4.60/ib. - $4.70/ib ) × 133100 ib. = $13310 U F

Calculation of direct material quantity variance

=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit

((10 ibs. X 4700 Unit)+(7ibsX12200)-133100)X $4.60= $3220 U F

For Sugar

calculation of direct material price variance:

= (Standard price per unit of material - Actual price per unit of material) × Actual quantity

= ($0.60 - $0.55 ) × 179400 = $8970 F

Calculation of direct material quantity variance

=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit

((8 ibs. X 4700 Unit)+(12 ibsX12200)-179400)X $0.60= $2760 F

Total Material Price Variance= $13310 UF+$8970 F= $4340 UF

Total Material Quantity Variance= $3220 UF+ $2760 F=$460 UF

Total Material Cost Variance= $4340 UF+ $460 UF= $4800UF

Dark Choclate

Calculation of direct labor rate variance

= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used

= ($13/hour - $12.50/hour) × 1710 Hours= $855 F

Calculation of direct labor efficiency variance:

= (standard hours required for actual production - actual hours used) × standard overhead recovery rate

= (0.40 Hour × 4700 Unit - 1710) × $13 = $2210 F

Light Choclate

Calculation of direct labor rate variance

= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used

= ($13/hour - $13.50/hour) × 6250 Hours= $3125 UF

Calculation of direct labor efficiency variance:

= (standard hours required for actual production - actual hours used) × standard overhead recovery rate

= (0.50 Hour × 12200 Unit - 6250) × $13 = $1950 U F

Total LAbour Rate Variance= $855 F+ $3125 UF= $2270 UF

Total Labour Efficiency Variance= $2210F+$1950 UF=$260 F

Total Labour Cost Variance = $2270 UF+ $260F=$2010 UF