Exam 17: Additional Topics in Variance Analysis

Explain the difference between the market share variance and the industry volume variance.

The standard direct labor cost for room cleaning at Texas Hotels is $2.50 per room ($10 per hour in wages divided by 4 rooms cleaned per hour). Actual labor costs were $11,330 for the month. During the period there were 1,100 labor hours worked; 3,920 rooms were cleaned during the month. Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the labor price variance for the period. b. Compute the labor efficiency variance for the period.

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 quantity variance for the basic model favorable or unfavorable?

The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows: X Y Price per pound \6 \9 Pounds per unit of product Z 10 5 In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used: X Y Price per pound \5 .70 \8 .40 Pounds used 216,000 114,000 - What is the total direct materials mix variance for May?

The sales mix variance would be:

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 - Is the total sales mix variance favorable or unfavorable?

The production mix variance measures the impact of substituting one material for another material during the production process.

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 quantity variance for the basic model favorable or unfavorable?

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 - If BE recognizes all variances at the earliest possible moment, what is the total material price variance?

The data below relate to a product of Bullfrog Company. Standard costs Materials, 2 pounds at \ 6 per pound \1 2 per unit Labor, 3 hours at \ 15 per hour \4 5per unit Budgeted production for the year 4,000units Actual results were: Production 3,600 units Material purchases, 8,000 pounds \4 6,400 Labor, 10,360 hours \1 60,580 Material used in production 7,300 pounds 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.

The direct materials price variance is based on the quantity of materials purchased when the quantity purchased is different from the quantity used.

The sales quantity variance would be favorable when a company sells:

A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10. Standard Quartity Standard Material () Cost/lb. Total Cost 0 \ 0.10 \ 0 80 0.08 6.40 0.02 - Is the material mix variance favorable or unfavorable?

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Level of activity 2,500 Overhead costs at the denominator activity level: Variable overhead cost \8 ,500 Fixed overhead cost \3 4,625 The following data pertain to operations for the most recent period: Actual hours 2,600 Standard hours allowed for the actual output 2,592 Actual total variable manufacturing overhead cost \9 ,100 Actual total fixed manufacturing overhead cost \ 35,025 - What is the predetermined overhead rate to the nearest cent?

The Morton Company gathered the following information for the year. Product Product Total Budgeted sales mix (units) 40\% 60\% 100\% Budgeted and actual sales price \ 48 \ 36 Budgeted variable cost per unit \ 32 \ 24 Actual sales (units) 126,000 Actual sales mix 60\% 40\% 100\% Fixed costs \ 80,000 What is the total sales mix variance?

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 credit to the Materials Inventory account for October would total:

What is the advantage of recognizing materials price variances at the time of purchase rather than at the time of use?

Using the abbreviations listed below, what is the formula for the industry volume variance? AMS = actual market share BMS = budgeted market share BCM = budgeted contribution margin per unit ACM = actual contribution margin per unit ATM = actual total market BTM = budgeted total market

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 quantity variance?

Output is usually defined as sales units in merchandising, but service organizations use measures of activity units, like patient days.