Chapter 17 – Additional Topics in Variance Analysis
17–11
17–24. (35 min.) Labor Mix and Yield Variance: Matt’s Eat ‘N Run.
a. and b.
Efficiency Variance
Actual
(AP x
AQ)
Purchase
Price
Variance
(SP x AQ)
Mix
Variance
(SP x
ASQ)
Yield
Variance
Flexible
Production
Budget
(SP x SQ)
Labor:
Skilled
$125,000
$20 x 6,000
= $120,000
$20 x (0.25 x 21,000)
= $20 x 5,250
= $105,000
$20 x (2/60 x 180,000)
= $20 x 6,000
= $120,000
$5,000 U
$15,000 U
$15,000 F
Efficiency Variance = $-0-
Unskill
ed
$240,000
$10 x
15,000 =
$150,000
$10 x (0.75 x 21,000)
= $10 x 15,750
= $157,500
$10 x (6/60 x 180,000)
= $10 x 18,000 =
$180,000
$90,000 U
$7,500 F
$22,500 F
Efficiency Variance = $30,000 F
Total
$365,000
$270,000
$262,500
= $300,000
$95,000 U
$7,500 U
$37,500 F
Efficiency Variance = $30,000 F
Chapter 17 – Additional Topics in Variance Analysis
17–12
17–25. (10 min.) Flexible Budgeting—Service Organization: Lowe & Rent.
Flexible Budget
(based on
actual of
6,900 hours)
Revenue …………………………..
$862,500a
Costs:
Professional salaries .……..
431,250b
Other variable costs ………..
117,300c
Fixed costs …………….……..
180,000d
Total costs…………..……..
$728,550
Profit …………………………..
$133,950
a
$862,500 =
6,900 hrs.
x
$750,000
6,000 hrs.
b
$431,250 =
6,900 hrs.
x
$375,000
6,000 hrs.
c
$117,300 =
6,900 hrs.
x
$102,000
6,000 hrs.
d
$180,000 =
Master budget fixed costs
Chapter 17 – Additional Topics in Variance Analysis
17–13
17–26. (20 min.) Sales Activity Variance—Service Organization: Lowe & Rent.
Flexible
Budget (based
on actual of
6,900 hours)
Sales
Activity
Varianc
e
Master Budget
(based on
budgeted
6,000 hours)
Revenue ………………………….
$862,50
0
$112,5
00
F
$750,000
Costs:
Professional salaries…..….
431,250
56,250
U
375,000
Other variable costs ……….
117,300
15,300
U
102,000
Fixed costs ……………….….
180,000
_______
180,000
Total costs ……………..….
$728,55
0
$71,55
0
U
$657,000
Profit ……………………………….
$133,95
0
$
40,950
F
$ 93,000
Chapter 17 – Additional Topics in Variance Analysis
17–14
17–27. (30 min.) Profit Variance Analysis—Service Organization: Lowe & Rent.
(1)
(2)
(3)
(4)
(5)
(6)
Actual
(6,900 hrs.)
Cost
Variance
s
Price
Varianc
es
Flexible
Budget
(6,900 hrs.)
Sales
Activity
Variance
Master
Budget
(6,000 hrs.)
Revenue ………..……………..
$825,00
0
$37,50
0 U
$862,500
$112,50
0 F
$750,00
0
Professional
salaries ………….……………..
465,000
$33,750
U
431,250
56,250
U
375,000
Other variable
costs ……………..……………
108,000
9,300
F
117,300
15,300
U
102,000
Fixed costs …….……………..
174,000
6,000
F
180,000
180,000
Profit ……………..……………
$
78,000
$18,450
U
$37,50
0 U
$
133,950
$
40,950
F
$
93,000
Chapter 17 – Additional Topics in Variance Analysis
17–15
17–28. (20 min.) Sales Price and Activity Variances: Dylan & Father.
Actual
(AP x AQ)
Price Variance
Flexible Budget
(SP x AQ)
Partner
$3,612,000
$770 x 4,800 hours
= $3,696,000
$84,000 U
Staff
$3,738,000
$182 x 20,400 hours
= $3,712,800
$25,200 F
Flexible
Budget
Master Budget
AQ x (SP –
SV)
Mix Variance
(SP – SV) x ASQ
Quantity
Variance
SQ x (SP – SV)
4,800 x ($770 – $364)
+ 20,400 x ($182 –
$98) =
$3,662,400
[$406a x (5,100 ÷ 25,890) x 25,200] +
[($84b x (20,790 ÷ 25,890) x 25,200]
= $3,715,233
5,100 x $406 +
20,790 x $84
= $3,816,960
$52,833 U
$101,727 U
$154,560 U
Activity Variance
a $406 = $770 – $364.
b $84 = $182 – $98.
Chapter 17 – Additional Topics in Variance Analysis
17–16
17–29. (10 min.) Variable Cost Variances: Harry’s Hotel.
Actual Costs
Price
Variance
Actual Inputs at
Standard Price
Efficiency
Variance
Flexible Budget
(Standard
Allowed)
$45,240
$12 x 2,750 =
$33,000
$12 x (15,000 ÷ 6)
= $30,000
$12,240 U
$3,000 U
17–30. (10 min.) Investigating Variances: Harry’s Hotel.
Chapter 17 – Additional Topics in Variance Analysis
17–17
Solutions to Problems
17–31. (20 min.) Sales Mix And Quantity Variances: Mattie’s Vineyards.
a. Price Variance = (Actual Price − Budgeted Price) x Actual Quantity:
Variety:
Price
Variance
=
(Actual Price − Budgeted Price)
x
Actual Quantity
Sauvignon
Blanc
$2,000 F
=
($7.25 − $7.00)
x
8,000
Chardonnay
900 U
=
($8.10 − $8.25)
x
6,000
Riesling
3,850 F
=
($7.10 − $6.75)
x
11,000
$4,950 F
b. and c.
The actual prices are not relevant here. The mix and quantity variances are based on
standard (budgeted) contribution margin per unit.
Flexible Budget
AQ x (SP – SV)
Mix
Variance
ASQ x (SP – SV)
Quantity
Variance
Master Budget
8,000 x ($7.00 – $5.00)
+ 6,000 x ($8.25 – $6.00)
+ 11,000 x ($6.75 – $4.75)
= $51,500.00
25,000 x (10,400/26,000) x ($7.00 – $5.00)
+ 25,000 x (3,900/26,000) x ($8.25 – $6.00)
+ 25,000 x (11,700/26,000) x ($6.75 – $4.75)
= $50,937.50
10,400 x ($7.00 – $5.00)
+ 3,900 x ($8.25 – $6.00)
+ 11,700 x ($6.75 – $4.75)
= $52,975.00
$562.50 F
$2,037.50 U
$1,475 U
Activity Variance
Chapter 17 – Additional Topics in Variance Analysis
17–18
17–32. (40 min.) Analyze Performance for a Restaurant: Doug’s Diner.
Hint for working the problem: Use sales revenue as the basis for measuring volume.
($000)
Actual
Purchases
Variances
Marketing &
Administrati
ve
Variances
Flexible
Budget
Activity
Variance
Master
Budget
Sales revenuea …………………………..
$1,20
0
$1,20
0
$200
F
$1,000
Variable costs:
Purchases ……………….………….
780
$60
U
720
b
120 U
600
Hourly wages …………..………………
60
60
c
10 U
50
Franchise fee …………..………………
36
36
d
6 U
30
Utilities …………………………..
76
$8
F
84
e
14 U
70
Total variable costs …………………………..
$952
$60
U
$8
F
$900
$ 150
U
$750
Contribution margin ……..……………………
$248
$60
U
$8
F
$300
$ 50
F
$250
Fixed costs: ……………….………….
Advertising …………………………..
100
100
100
Depreciation …………….…………….
50
50
50
Lease ……………………..……
30
30
30
Salaries …………………..………
30
30
30
Total fixed costs …………..………………
$210
$ 210
$ 210
Operating profit …………………………..
$ 38
$60
U
$8
F
$
90
$ 50
F
$ 40
Chapter 17 – Additional Topics in Variance Analysis
17–19
Notes on the following page.
Chapter 17 – Additional Topics in Variance Analysis
17–20
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17–32. (continued)
a Sales revenue is used as the basis of volume measurement because there are no price changes.
b
$600
x
$1,200
$1,00
0
c
$50
x
$1,200
$1,00
0
d
$30
x
$1,200
$1,00
0
e
$70
x
$1,200
$1,00
0