Exam 17: Additional Topics in Variance Analysis

The next year's budget for Trend, Inc., a multi-product company, is given below: Product A Product B Sales \ 1,890,000 \ 1,377,000 Variable costs 926,100 596,700 Fixed costs 500,000 500,000 Net income 463,900 280,300 Units 252,000 108,000 At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company. Product Lines Units Sales A 253,230 \ 1,848,579 B 113,770 \ 1,479,010 - Is the total sales price variance favorable or unfavorable?

Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below: Cost of material purchased in October \ 23.10 per ounce Material purchased in October 2,300 ounces Material used in production in October 2,120 ounces Actual output in October 600 units The material was purchased on account and Calvin Corporation uses a standard costing system. - The debit to the Materials Inventory account for October would total:

The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the month ended April 30: (CIA adapted) Flexible Static Actual Budget Flexible (Master) Results Variances Budget Budget Sales (units) 11,000 -0 11,000 12,000 Revenue (sales) \ 208,000 \ 12,000 \ 220,000 \ 240,000 Variable costs 121,000 11,000 110,000 120,000 Contribution margin \ 87.000 \ 23.000 \ 110.000 \ 120.000 Fixed costs 72,000 -0 72,000 72,000 Operating Income \ 15,000 \ 23,000 \ 38,000 \ 48,00 The sales activity variance is:

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Basic Deluxe Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models. - Is the sales activity variance for the deluxe model favorable or unfavorable?

Some variances are the result of accounting errors and omissions, including timing differences.

Prince Inc. has the following information: Total payroll Standard direct lab or hours Labor rate variance Labor mix variance Labor yield variance \ 165,300 45,000 \ 8,700F \ 4,000F \ 2,000F - What was the standard direct labor rate?

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Basic Deluxe Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models. - What is the sales activity variance for the basic model?

Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income. Actual Budget Dresses sold Sales \ 235,000 \ 300,00 Variable costs Contribution margin \9 0,000 120,000 Fixed Costs Operating income \& \& - The variable costs flexible budget variance for November is:

Which of the following statements is(are) false? (A) All variances should be prorated to inventories and cost of goods sold at the end of the accounting period. (B) If the number of units produced exceeds the number of units sold, the full-absorption operating profit will be lower than variable costing operating profit.

The next year's budget for Trend, Inc., a multi-product company, is given below: Product A Product B Sales \ 1,890,000 \ 1,377,000 Variable costs 926,100 596,700 Fixed costs Net income Units 252,000 108,000 At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company. Product Lines Units Sales A 253,230 \ 1,848,579 B 113,770 \ 1,479,010 - What is the total sales mix variance?

Which of the following statements is(are) true? (A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price variance will, when prorated, increase the value of the Finished Goods Inventory. (B) Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold.

A company's direct labor standards for a given operation and the actual results for the current period are provided below: Standard rates: Advanced: $18 per hour Trained: $15 per hour Novice: $10 per hour Time to produce one unit: One (1) Advanced worker at 30 minutes each = 30 minutes/unit Three (3) Trained workers at 20 minutes each = 60 minutes/unit Two (2) Novice workers at 15 minutes each = 30 minutes/unit 120 minutes/unit Actual Results: Units produced: 4,000 Labor used: 2,200 hours of Advanced workers 4,300 hours of Trained workers 1,900 hours of Novice workers Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the labor efficiency variances for each worker level. b. Compute the labor mix variances for each worker level. c. Compute the labor yield variances for each worker level.

The Vargas Company had the following expectations for the year: Budgeted results for the year were: Total market for the product 175,000 Vargas' budgeted sales \ 1,763,125 Variable costs per unit \ 18.75 Selling price per unit \ 32.50 Actual results for the year were: Total market for the product 166,250 Vargas's actual sales 56,525 Total Variable costs \1 ,073,975 Total sales \1 ,752,275 - Is the industry volume variance favorable or unfavorable?

Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income. Actual Budget Dresses sold Sales \ 235,000 \ 300,00 Variable costs Contribution margin \9 0,000 120,000 Fixed Costs Operating income \& \& - What additional information is needed for Danner to calculate the dollar impact of a change in market share on operating income for November? (CMA adapted)

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Basic Deluxe Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models. - What is the sales mix variance for the deluxe model?

Bonner Company's direct labor cost for March was as follows: Actual direct labor hours 30,000 Standard direct labor hours 31,000 Rate variance \4 ,500 Total payroll \1 89,000 Labor mix variance \4 ,225 - What was Bonner's direct labor yield variance?

The production yield variance is conceptually the same as the sales quantity variance.

The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective. The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: Chemical Std input quantity Std cost per liter Total cost Echol 200 \ 0.200 \ 40.00 Protex 100 0.425 42.50 Benz 250 0.150 37.50 CT-40 0.300 The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period. Chemical Quantity Purchased Total Cost Quantity Used Echol 25,000 \ 5,365 26,600 Protex 13,000 6,240 12,880 Benz 40,000 5,840 37,800 CT-40 7,500 2,220 7,140 85,500 84,420 - What is the total material mix variance?

Which of the following factors should not be considered when deciding whether to investigate a variance?

When deciding how many variances to calculate, what two items need to be considered? Be sure to define your terms.