Exam 17: Additional Topics in Variance Analysis

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 2,220 - Is the material yield variance favorable or unfavorable?

The budget for a given cost during a given period was $80,000. The actual cost for the period was $72,000. Considering these facts, the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

Which of the following sales variances is further analyzed into the market share and industry volume variances?

Fremont, Inc., builds storage boxes to custom order. Materials include 20 board feet of lumber at $1.25/board foot. Standards call for 2 hours of labor at $15 per hour. During March, 4,200 boxes were built. Materials purchased totaled $103,890 for 86,300 board feet of lumber. Actual lumber usage in production was 82,310 board feet. The March payroll was $139,360 for 9,150 hours. Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the direct material price variance. b. Compute the direct material efficiency variance. c. Compute the direct labor rate variance. d. Compute the direct labor efficiency variance.

Malloy Corporation has provided the following data concerning its most important raw material, compound I51D: Standard cost \ 30.50 per liter Standard quantity 4.6 liters per unit of output Cost of material purchased in October \ 30.70 per liter Material purchased in October 4,000 liters Material used in production in October 3,580 liters Actual output in October 800 units The raw material was purchased on account. Required: a. Record the purchase of the raw material at standard cost in a journal entry. b. Record the use of the raw material in production in a journal entry.

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 mix variance for the deluxe model favorable or unfavorable?

Standards are estimates and should be based on:

Compound Y23Z is used by Carrington Corporation to make one of its products. The standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data concerning the compound in the most recent month appear below: Cost of material purchased in November, per ounce \3 9.20 Material purchased in November, ounces 2,800 Material used in production in November, ounces 2,360 Actual output in November, units 500 The raw material was purchased on account. Required: a. Record the purchase of the raw material at standard cost in a journal entry. b. Record the use of the raw material in production in a journal entry.

Next year's budget for Alton, Inc., is given below: Product A Product B Sales \9 45,000 \6 88,500 Variable costs 459,900 297,000 Fixed costs Net income Units 126,000 54,000 Market share 12\% 20.0\% 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: Product Line Units Sales Mkt share 1 126,200 \ 958,579 16.0\% 2 56,800 \ 721,010 14.2\% Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the sales activity variance for each product. b. Compute the market share variance for each product. c. Compute the industry volume variance for each product.

Advantage Co. sells two types of drives-standard and specialty. The budget is based on a combination of last year's information as well as forecasted industry sales and the company's market share. The following information is provided for June: Required: 1) Prepare a static budget and flexible budget for the company for June. 2) What is the sales activity variance?

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 deluxe model?

The general approach in variance analysis is to separate the variance into components based on a budgeting formula.

When the actual amount of a material used in production is greater than the standard amount allowed for the actual output, the journal entry would include:

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 2,220 - Is the total material price variance favorable or unfavorable?

A chemical company in the Midwest produces a solvent used by manufacturers of plastics. Three basic chemicals go into this solvent. The standards for one-liter of this product are: Chemical A: 500 ml. @ $10 per liter Chemical B: 100 ml. @ $50 per liter Chemical C: 400 ml. @ $20 per liter During the last period, 10,000 liters of the solvent were produced and the company purchased the following amounts of each chemical: Chemical A: 6,400 liters @ $9.00 per liter Chemical B: 900 liters @ $75.00 per liter Chemical C: 4,200 liters @ $20.00 per liter Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no beginning and ending inventories. Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the direct material price variances for the three basic chemicals. b. Compute the direct material efficiency variances for the three basic chemicals. c. Compute the direct material mix variances for the three basic chemicals. d. Compute the direct material yield variances for the three basic chemicals.

Labor variances are more important than material variances in service organizations.

The Buffett Company had the following expectations: Total market for the product 175,000 units Buffett's budgeted sales 54,250 Contribution margin per urit \ 13.00 Actual results for the year were: Total market for the product 166,250 units Buffett's actual sales 56,525 Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute Buffett's sales activity variance. b. Compute Buffett's market share variance. c. Computer Buffett's industry volume variance.

Explain the difference between the sales mix variance and the sales quantity variance.

Porcini Enterprises produces two products, AR and QT. Actual and budgeted information for the year ending April 30 is provided below: Product AR Product QT Budget Actual Budget Actual Unit sales 2,000 2,800 6,000 5,600 Sales \ 6,000 \ 7,560 \ 12,000 \ 11,760 Fixed costs 1,800 1,900 2,400 2,800 Variable costs 2,400 2,800 6,000 5,880 Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the sales activity variance for each product. b. Compute the sales mix variance for each product. c. Compute the sales quantity variance for each product.

What is the correct journal entry to record direct labor when the actual labor mix is favorable and the total standard hours allowed is greater than the total actual hours worked?