Flexible-budget and sales volume variances. Cascade, Inc., produces the basic fillings used in many popular frozen desserts and treats—vanilla and chocolate ice creams, puddings, meringues, and fudge. Cascade uses
Jeff Geller, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable
- 1. Calculate the static-
budget variance in units, revenues, variable manufacturing costs, and contribution margin. What percentage is each static-budget variance relative to its static-budget amount? - 2. Break down each static-budget variance into a flexible-budget variance and a sales-volume variance.
- 3. Calculate the selling-price variance.
- 4. Assume the role of
management accountant at Cascade. How would you present the results to Jeff Geller? Should he be more concerned? If so, why?
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COST ACCOUNTING
- Flexible budgeting and variance analysis Im Really Cold Coat Company makes womens and mens coats. Both products require filler and lining material. The following planning information has been made available: Im Really Cold Coat Company does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, Im Really Cold Coat Company experienced the following actual results: The expected beginning inventory and desired ending inventory were realized. Instructions 1. Prepare the following variance analyses for both coats and the total, based on 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 at the end of the year instead of the planned production at the beginning of the year?arrow_forwardFlexible 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: 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: Instructions 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, 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 for the year instead of the planned production for the year?arrow_forwardBudgeted unit sales for the entire countertop oven industry were 2,500,000 (of all model types), and actual unit sales for the industry were 2,550,000. Recall from Cornerstone Exercise 18.6 that Iliff, Inc., provided the following information: Required: 1. Calculate the market share variance (take percentages out to four significant digits). 2. Calculate the market size variance. 3. What if Iliff actually sold a total of 41,000 units (in total of the two models)? How would that affect the market share variance? The market size variance?arrow_forward
- Cortez Manufacturing, Inc. has the following flexible budget formulas and amounts: Actual results for May for the production and sale of 5,000 units were as follows: Prepare a performance report for May that includes the identification of the favorable and unfavorable variances.arrow_forwardBuenolorl Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet: Management has decided to investigate only those variances that exceed the lesser of 10% of the standard cost for each category or 20,000. During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow: a. A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected. (No inventories of liquids are maintained.) The price paid per ounce averaged 0.42. b. Exactly 250,000 bottles were used. The price paid for each bottle was 0.048. c. Direct labor hours totaled 48,250, with a total cost of 733,000. Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly throughout the year. (Note: Round unit costs to the nearest cent and total amounts to the nearest dollar.) Required: 1. Calculate the upper and lower control limits for materials and labor. 2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated? 3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated?arrow_forwardFlexible Budgets, Overhead Cost Variances, and Management Control Fixed manufacturing overhead variance analysis The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Sourdough Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. The following is some budget data for the Sourdough Bread Company for 2017. Direct manufacturing labor use 0.02 hours per baguette Fixed manufacturing overhead $3.00 per direct manufacturing labor-hour The following is additional information for the Sourdough Bread Company for the year ended December 31, 2017: Planned (budgeted) output 3,100,000 baguettes Actual production 2,600,000 baguettes Budgeted direct manufacturing labor 62,000 hours Actual direct manufacturing labor…arrow_forward
- Price and efficiency variances, benchmarking. Nantucket Enterprises manufactures insulated cold beverage cups printed with college and corporate logos, which it distributes nationally in lots of 12 dozen cups. In June 2017, Nantucket produced 5,000 lots of its most popular line of cups, the 24-ounce lidded tumbler, at each of its two plants, which are located in Providence and Amherst. The production manager, Shannon Bryant, asks her assistant, Joel Hudson, to nd out the precise per-unit budgeted variable costs at the two plants and the variable costs of a competitor, Beverage Mate, who offers similar-quality tumblers at cheaper prices. Hudson pulls together the following information for each lot:arrow_forwardSunshine Foods manufactures pumpkin scones. For January 2017, it budgeted to purchase and use 14,750 pounds of pumpkin at $0.92 a pound. Actual purchases and usage for January 2017 were 16,000 pounds at $0.85 a pound. Sunshine budgeted for 59,000 pumpkin scones. Actual output was 59,200 pumpkin scones. 1. Compute the flexible-budget variance. 2. Compute the price and efficiency variances. 3. Comment on the results for requirements 1 and 2 and provide a possible explanation for themarrow_forwardComputing and journalizing standard cost variances Middleton manufactures coffee mugs that it sells to other companies for customizing with their own logos. Middleton prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month: Actual cost and production information for July 2018 follows: There were no beginning or ending inventory balances. All expenditures were on account. Actual production and sales were 62,500 coffee mugs. Actual direct materials usage was 11,000 lbs. at an actual cost of $0.17 per lb. Actual direct labor usage of 197,000 minutes at a cost of $33,490. Actual overhead cost was $10,835 variable and $29,965 fixed. Selling and administrative costs were $130,000. Requirements Compute the cost and efficiency variances for direct materials and direct labor. Journalize the purchase and usage of direct materials and the assignment of…arrow_forward
- Possible causes for price and efficiency variances. You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a ctitious Belgian chocolatier for the month of June. The chocolatier manufactures truffles in 12-piece boxes. The production is labor intensive, and the delicate nature of the chocolate requires a high degree of skill.arrow_forwardComputing and journalizing standard cost variances Moss manufactures coffee mugs that it sells to other companies for customizing with their own logos. Moss prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month: Actual cost and production information for July 2018 follows: a. There were no beginning or ending inventory balances. All expenditures were on account. b. Actual production and sales were 62,500 coffee mugs. c. Actual direct materials usage was 11,000 lbs, at an actual cost of $0.17 per lb. d. Actual direct labor usage was 197,000 minutes at a total cost of $25,610. e. Actual overhead cost was $10,835 variable and $29,765 fixed. f. Selling and administrative costs were $95,000. Requirements Compute the cost and efficiency variances for direct materials and direct labor. Journalize the purchase and usage of direct materials and the…arrow_forwardOverhead variances and sales-volume variance. The Roller Bag Company manufactures extremely light and rolling suitcases. It was one of the rst companies to produce rolling suitcases and sales have increased for the past several years. In 2017, Roller Bag budgeted to sell 150,000 suitcases for $80 each. The budgeted standard machine hours for productionin 2017 were 375,000 machine hours. Budgeted xed overhead costs are $525,000, and variable overhead cost was budgeted at $1.75 per machine-hour. In 2017, Roller Bag experienced a drop in sales due to increased competition for rolling suitcases. Roller Bag used 310,000 machine-hours to produce the 120,000 suitcases it sold in 2017. Actual variable overhead costs were $488,000 and actual xed overhead costs were $532,400. The average selling price of the suitcases sold in 2017 was $72. Actual direct materials and direct labor costs were the same as standard costs, which were $20 per unit and $18 per unit, respectively.arrow_forward
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