Concept introduction:
Variance: The term variance is used under standard costing system. Variance is actually the difference between the standard amount and actual amount. The variance can be calculated for costs and revenues.
Requirement 1:
To calculate:
The Sales Price and Volume variances.
Concept introduction:
Standard Costing System: Standard Costing system allows estimating the costs, preparing budgets for future periods, and analyzing the performance by comparing the budgets with actual results and find variances.
Variance: The term variance is used under standard costing system. Variance is actually the difference between the standard amount and actual amount. The variance can be calculated for costs and revenues.
Requirement 2:
To calculate:
The Sales Price and Volume variances.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
MANAGERIAL ACCOUNTING ACCT 2302 >IC<
- Saginaw Company is a garden products wholesale firm. In December, Saginaw Company expects to sell 30,000 bags of vegetable fertilizer at an average price of 5.30 per bag. Actual results are 30,600 bags sold at an average price of 5.20 per bag. Required: 1. Calculate the sales price variance for December. 2. Calculate the sales volume variance for December. 3. Calculate the overall sales variance for December. Explain why it is favorable or unfavorable. 4. What if December sales were actually 29,800 bags? How would that affect the sales price variance? The sales volume variance? The overall sales variance?arrow_forwardUchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activity supply: five purchasing agents capable of processing 2,400 orders per year (12,000 orders) Purchasing agent cost (salary): 45,600 per year Actual usage: 10,600 orders per year Value-added quantity: 7,000 orders per year Required: 1. Calculate the volume variance and explain its significance. 2. Calculate the unused capacity variance and explain its use. 3. What if the actual usage drops to 9,000 orders? What effect will this have on capacity management? What will be the level of spending reduction if the value-added standard is met?arrow_forwardSmith Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for the cost of one basket (unit): Smith Industries made 3,000 baskets in July and used 15,500 pounds of material to make these units. Smith Industries paid $39,370 for the 15,500 pounds of material. A. What was the direct materials price variance for July? B. What was the direct materials quantity variance for July? C. What is the total direct materials cost variance? D. If Smith Industries used 15,750 pounds to make the baskets, what would be the direct materials quantity variance?arrow_forward
- Cloud Shoes manufactures recovery sandals and is planning on producing 12.000 units in March and 11,500 in April. Each sandal requires 1.2 yards if material, which costs $3.00 per yard. The companys policy is to have enough material on hand to equal 15% of next months production needs and to maintain a finished goods inventory equal to 20% of the next months production needs. What is the budgeted cost of purchases for March?arrow_forwardListed below are the budgeted factory overhead costs for 2011 for Moss Industries at a projected level of 2,000 units: Required: Prepare flexible budgets for factory overhead at the 1,000, 2,000, and 4,000 unit levels. (Hint: You must first decide which of the listed costs should be considered variable and which should be fixed.)arrow_forwardTIB makes custom guitars and prepared the following sales budget for the second quarter It also has this additional information related to its expenses: Direct material per unit $55, Direct labor per hour 20, Variable manufacturing overhead per hour 3.50, Fixed manufacturing overhead per month 3,000, Sales commissions per unit 20, Sales salaries per month 5,000, Delivery expense per unit 0.50, Utilities per month 4,000. Administrative salaries per month 20,000, Marketing expenses per month 8,000, Insurance expense per month 11,000, Depreciation expense per month 9,000. Prepare a sales and administrative expense budget for each month in the quarter ended June 30. 2018.arrow_forward
- Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for one ladder (unit): Sitka Industries made 3,000 ladders in July and used 8,800 pounds of material to make these units. Smith Industries bought 15,500 pounds of material in the current period. There was a $250 unfavorable direct materials price variance. A. How much in total did Sitka pay for the 15,500 pounds? B. What is the direct materials quantity variance? C. What is the total direct material cost variance? D. What ii 9,500 pounds were used to make these ladders, what would be the direct materials quantity variance? E. It there was a $340 favorable direct materials price variance, how much did Sitka pay for the 15,500 pounds of material?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_forwardComp Wiz sells computers. During May, it sold 350 computers at a $1,200 average price each. The May fixed budget included sales of 365 computers at an average price of $1,100 each. 1. Compute the sales price variance and classify it as favorable or unfavorable. 2. Compute the sales volume variance and classify it as favorable or unfavorable.arrow_forward
- Harvest Foods manufactures pumpkin scones. For January 2017, it budgeted to purchase and use 16,500 pounds of pumpkin at $0.87 a pound. Actual purchases and usage for January 2017 were 17,000 pounds at $0.82 a pound. Harvest budgeted for 66,000 pumpkin scones. Actual output was 57,800 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 them.arrow_forwardMia Wiz sells computers. During May, it sold 500 computers at a $800 per unit price. The fixed budget for May predicted sales of 550 computers at an per unit price of $780. AQ = Actual QuantitySQ = Standard QuantityAP = Actual PriceSP = Standard Price 1&2. Compute the sales price variance and the sales volume variance for May. Identify it as favorable or unfavorable. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.)arrow_forwardBerlin Corp. buys and sells two types of sunglasses in Berlin: ABC and DEF. Budgeted and actual results are as follows -> see picture Berlin corp. prepared the budget for 2017 assuming 12% of market share based on total sales of 1,900,000 units in Berlin. However, actual sales volume in Berlin was 2,400,000 units. Calculate the market-share and market-size variances for Berlin corp. in 2017. Calculate all variances in terms of contribution margin. Comment on the results.arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegePrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning