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 12 lbs. 8 lbs. $7.25 Sugar 10 lbs. 14 lbs. 1.40 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 Company had the following actual results: Dark Chocolate Light Chocolate Actual production (cases) 5,000 10,000 Actual Price per Pound Actual Pounds Purchased and Used Cocoa $7.33 140,300 Sugar 1.35 188,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate $15.25 per hr. 2,360 Light chocolate 15.80 per hr. 6,120 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?

Answer 1

Answer:

IMPORTANT NOTE: The data of the calculation was obtained from an online research because you plot the information incomplete.

Explanation:

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.

Material Price variance = (Standard Rate – Actual Rate) * Actual Quantity

Cocoa: Material price variance = ($7.25 - $7.33) * 140,300

                               Material price variance = -$11,224

Sugar: Material price variance = ($1.40 - $1.35) * 140,300

                               Material price variance = $7,015

Total Material price variance = -$4,209 Unfavorable.

Material Quantity variance = (Standard Quantity for actual output – Actual Quantity) * Standard rate

               Cocoa:

                               Standard Quantity for actual output = (12lbs * 5,000 cases + 8lbs * 10,000 cases)

                               Standard Quantity for actual output = 140,000

                               Material Quantity variance = (140,000 – 140,300) * $7.25

                               Material Quantity variance = -$2,175

               Sugar:

                               Standard Quantity for actual output = (10lbs * 5,000 cases + 14lbs * 10,000 cases)

                               Standard Quantity for actual output = 190,000

                               Material Quantity variance = (190,000 – 188,000) * $1.4

                               Material Quantity variance = $2,800

Total Material Quantity Variance = $625 Favorable

Total Material Cost Variance = Material Price variance + Material Quantity variance

               Total Material Cost Variance = -$4,209 + $625

               Total Material Cost Variance = -$3,584 Unfavorable.

Labor Rate variance = (Standard labor Rate – Actual labor Rate) * Actual Labor Hours

Dark Chocolate: Labor Rate variance = ($15.5 - $15.25) * 2,360

                                               Labor Rate variance = $590

Light Chocolate: Labor Rate variance = ($15.5 - $15.8) * 6,120

                                               Labor Rate variance = -$1,836

Total Labor Rate variance = -$1,246 Unfavorable.

Labor Time variance = (Standard hours allowed – Actual hours worked) * Standard rate

               Dark Chocolate:

                                               Labor Time variance = (5,000 cases * 0.5 hour per case – 2,360) * $15.5

                                               Labor Time variance = (2,500 hours – 2,360 hours) * $15.5

                                               Labor Time variance = $2,170

               Light Chocolate:

                                               Labor Time variance = (10,000 cases * 0.6 hour per case – 6,120) * $15.5

                                               Labor Time variance = (6,000 hours – 6,120 hours) * $15.5

                                               Labor Time variance = -$1,860

Total Labor Time Variance = $310 Favorable

Total Labor Cost Variance = Labor Rate variance + Labor Time variance

               Total Material Cost Variance = -$1,246 + $310

               Total Material Cost Variance = -$936 Unfavorable.

Download xlsx