PR 22-2A Flexible budgeting and variance analysisI Love My Chocolate Company makes dark chocolate and light chocolate. Both productsrequire cocoa and sugar. The following planning information has been made available:Standard Amount per CaseDark ChocolateLight Chocolate Standard Price per Pound$7.25to8 lbs.1s14 lbs.0.60 hr.Сосоа12 Ibs.1.4010 Ibs.SugarStandard labor time0.50 hr.lag Light Chocolate11,000 cases$15.50 per hr.Dark ChocolateVAGLSPlanned production4,700 casesStandard labor rate$15.50 per hr.I Love My Chocolate Company does not expect there to be any beginning or endinginventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Com-pany had the following actual results:to 13Dark ChocolateLight ChocolateActual production (cases)5,00010,000Actual Price per PoundActual Pounds Purchased and UsedСосоа$7.33140,300Sugar1.35188,000Actual Labor RateActual Labor Hours UsedwerenteDark chocolateLight chocolate$15.25 per hr.2,36015.80 per hr.6,120Instructions bnexeai1. Prepare the following variance analyses for both chocolates and the total, based onthe actual results and production levels at the end of the budget year:a. Direct materials price, quantity, and total variance.b. Direct labor rate, time, and total variance.2.Why are the standard amounts in part (1) based on the actual production forthe year instead of the planned production for the year?

The study of variances between actual behavior and predicted or planned behavior in budgeting or…

Flexible budgeting and variance analysls PR 22-2A I Love My Chocolate Company makes dark chocolate and light chocolate. Both require cocoa and sugar. The following planning information has been made available: Standard Amount per Case Dark Chocolate Light Chocolate Standard Price per Pound 12 Ibs. 8 lbs. $7.25 Cocoa 1.40 10 Ibs. 14 lbs. Sugar Standard labor time 0.50 hr. 0.60 hr. Dark Chocolate Light Chocolate Planned production 4,700 cases 11,000 cases Standard labor rate $15.50 per hr. $15.50 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 Com pany had the following actual results:orlsiew Dark Chocolate Light Chocolate Actual production (cases) 5,000 10,000 Actual Price per Pound Actual Pounds Purchased and Used Сосоа $7.33 140,300 Sugar 1.35 188,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate $15.25 per hr. 15.80 per hr. 2,360 Light chocolate 6,120 Instructions 1. Prepare the following variance analyses for both chocolates and the total, based o the actual results and production levels at the end of the budget year: a. Direct materials price, quantity, and total variance. b. Direct labor rate, time, and total variance. 2. Why are the standard amounts in part (1) based on the actual production fc the year instead of the planned production for the year?

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter22: Performance Evaluation Using Variances From Standard Costs

Section: Chapter Questions

Problem 22.3CP: Variance interpretation You have been asked to investigate some cost problems in the Assembly...

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Variance interpretation You have been asked to investigate some cost problems in the Assembly Department of Ruthenium Electronics Co., a consumer electronics company. To begin your investigation, you have obtained the following budget performance report for the department for the last quarter. Ruthenium Electronics Co.Assembly Department Quarterly Budget Performance Report Standard Quantity at Standard Rates Actual Quantity at Standard Rates Quantity Variances Direct labor 157,500 227,500 70,000 U Direct materials 297,500 385,000 87,500 U Total 455,000 612,500 157,500 U You also obtained the following reports: Ruthenium Electronics Co.Purchasing Department Quarterly Budget Performance Report Actual Quantity at Standard Rates Actual Quantity at Actual Rates Price Variance Direct materials 437,500 385,000 (52,500) F Ruthenium Electronics Co.Fabrication Department Quarterly Budget Performance Report Standard Quantity at Standard Rates Actual Quantity at Standard Rates Quantity Variances Direct labor 245,000 203,000 (42,000) F Direct materials 140,000 140,000 0 Total 385,000 343,000 (42,000) F You also interviewed the Assembly Department supervisor. Excerpts from the interview follow: Q: What explains the poor performance in your department? A: Listen, youve got to understand what its been like in this department recently. Lately, it seems no matter how hard we try, we cant seem to make the standards. Im not sure what is going on, but weve been having a lot of problems lately. Q: What kind of problems? A: Well, for instance, all this Quarter weve been requisitioning purchased parts from the material storeroom, and the parts just didnt fit together very well. Im not sure what is going on, but during most of this quarter, weve had to scrap and sort purchased partsjust to get our assemblies put together. Naturally, all this takes time and material. And thats not all. Q: Go on. A: All this Quarter the work we've been receiving from the Fabrication Department has been shoddy. I mean, maybe around 20% of the stuff that comes in from Fabrication just cant be assembled. The fabrication is all wrong. As a result we've had to scrap and rework a lot of the stuff. Naturally, this has just shot our quantity variances. Interpret the variance reports in light of the comments by the Assembly Department supervisor.
Variance interpretation You have been asked to investigate some cost problems in the Assembly Department of Ruthenium Electronics Co., a consumer electronics company. To begin your investigation, you have obtained the following budget performance report for department for the last quarter: The following reports were also obtained: You also interviewed the Assembly Department supervisor. Excerpts from the interview follow: Q: What explains the poor performance in your department? A: Listen, you've got to understand what it's been like in this department recently. Lately, it seems no matter how hard we try, we can't seem to make the standards. I'm not sure what is going on, but we've been having a lot of problems lately. Q: What kind of problems? A: Well, for instance, all this quarter we've been requisitioning purchased parts from the material storeroom, and the pans just didn't fit together very well I'm not sure what is going on. but during most of this quarter we've had to scrap and sort purchased pansjust to get our assemblies put together. Naturally, all this takes time and material. And that's not all. Q: Go on. A: All this quarter, the work that we've been receiving from the Fabrication Department has been shoddy. I mean, maybe around 20% of the stuff that comes in from Fabrication just can't be assembled. The fabrication is all wrong. As a result, we've had to scrap and rework a lot of the stuff. Naturally, this has just shot our quantity variances. Interpret the variance reports in light of the comments by the Assembly Department supervisor.

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