Documente Academic
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Documente Cultură
17
17-1
17-6.
If a company has two or more products, a mix variance can arise even if the net effect of
all variances is zero. It might be very useful to learn about the mix variance because if the
mix is changing, the company might need to change production and/or marketing
strategies to meet the change in mix. The U.S. automobile industry was facing rising
revenues and rising volumes but, unfortunately, there were falling profits because buyers
were purchasing smaller cars that had lower profit margins for the manufacturers.
17-7.
Examples include:
Steel mills which can process both new steel and recycled scrap
Chemical companies
17-2
17-3
Solutions to Exercises
17-14. (15 min.)Variable Cost Variances Where Materials Purchased And Used Are
Not Equal: Golden Company.
Flexible
Actual
Budget
Inputs at
(Standard
Actual
Price
Standard
Efficiency
Allowed for
Costs
Variance
Price
Variance
Good Output)
Purchase
$174,474
$172,530
Computations
$1,944 U
7.86 x 14,000
= $110,040
$115,020
Usage
Computations
$4,980 U
17-15. (15 min.) Industry Volume And Market Share Variances: Kays Auto Products.
Flexible Budget
(SCM x AQ)
Market
Share
Variance
Standard Contribution
Margin Times
Budgeted Market
Share Times Actual
Industry Volume
Industry
Volume
Variance
Master Budget
(SCM x SQ)
(SCM x ASQ)
$4 x 45,000
$4 x 20% x 300,000
$4 x 20% x 250,000
= $180,000
= $240,000
= $200,000
$60,000 U
$40,000 F
$20,000 U
17-4
Mix
Variance
Quantity
Variance
Master Budget
+ 9,000 x ($249.50 -
= $2,387,500
=$2,185,776
$100.00)
$201,724 F
= $2,535,500
$349,724 U
$148,000 U
Activity Variance
17-5
Flexible Budget
AQ x (SP SV)
Quantity
Variance
Master Budget
= $4,560,000
=$4,480,000
= $4,000,000
$80,000 F
$480,000 F
$560,000 F
Activity Variance
17-6
Mix
Variance
Quantity
Variance
Master Budget
= $31,104
=$31,680
= $35,200
$576 U
$3,520 U
$4,096 U
Activity Variance
17-7
Efficiency Variance
Actual
(AP x AQ)
Material:
Twinkle
Purchase
Price
Variance
$18 x
44,000 =
$792,000
Mix
Variance
(SP x AQ)
Yield
Variance
$20 x 44,000
= $880,000
$88,000 F
(SP x ASQ)
$80,000 U
Flexible
Production
Budget
(SP x SQ)
$-0-
$32 x 76,000
= $2,432,000
$30 x 76,000
= $2,280,000
$152,000 U
$120,000 F
Total
$3,224,000
$3,160,000
$64,000 U
$3,200,000
$40,000 F
= $3,200,000
$-0-
Production of 2,000 units should require 120,000 units of input (= 2,000 x 20 + 2,000 x
40). Actual usage was 120,000 units (= 44,000 + 76,000), so there was no yield variance.
17-8
Efficiency Variance
Actual
(AP x AQ)
Material:
Weed-X
Purchase
Price
Variance
$7.75 x
6,600
= $51,150
Mix
Variance
(SP x AQ)
Yield
Variance
$8 x (0.005 x
1,080,000)
= $8 x 5,400
= $43,200
$8 x (1/2 x 11,880)
= $8 x 5,940
= $47,520
$8 x 6,600 =
$52,800
$1,650 F
(SP x ASQ)
$5,280 U
Flexible
Production
Budget
(SP x SQ)
$4,320 U
$20 x 5,280
= $105,600
$5,280 U
$20 x (0.005 x
1,080,000)
= $20 x 5,400
= $108,000
$10,800 U
Total
$162,030
$158,400
$166,320
$3,630 U
$7,920 F
= $151,200
$15,120 U
17-9
17-23. (35 min.) Labor Mix and Yield Variance: Matts Eat N Run.
a. and b.
Efficiency Variance
Actual
(AP x
AQ)
Purchase
Price
Variance
Labor:
Skilled
Mix
Variance
(SP x AQ)
$15 x 6,000
= $90,000
$92,000
$2,000 U
(SP x
ASQ)
$11,250 U
Flexible
Production
Budget
(SP x SQ)
Yield
Variance
$7.50 x
15,000 =
$112,500
$180,000
$67,500 U
$5,625 F
$7.50 x (6/60 x
180,000)
= $7.50 x 18,000
= $135,000
$16,875 F
Total
$272,000
$202,500
$196,875
$69,500 U
$5,625 U
= $225,000
$28,125 F
17-10
Flexible Budget
(based on
actual of
6,900 hours)
Revenue................................
Costs:
Professional salaries..........
Other variable costs...........
Fixed costs.........................
Total costs......................
Profit......................................
a
b
c
d
$862,500 =
$431,250 =
$117,300 =
6,900 hrs.
6,000 hrs.
6,900 hrs.
6,000 hrs.
6,900 hrs.
6,000 hrs.
$862,500a
431,250b
117,300c
180,000d
$728,550
$133,950
x $750,000
x
$375,000
$102,000
17-11
Flexible Budget
(based on
actual of
6,900 hours)
Revenue................................ $862,500
Costs:
Professional salaries..........
431,250
Other variable costs...........
117,300
Fixed costs.........................
180,000
Total costs...................... $728,550
Profit...................................... $133,950
17-12
Sales
Activity
Variance
Master Budget
(based on
budgeted 6,000
hours)
$112,500 F
$750,000
56,250 U
15,300 U
________
$71,550 U
$ 40,950 F
375,000
102,000
180,000
$657,000
$ 93,000
17-13
(6)
Master
Budget
(6,000 hrs.)
$750,000
375,000
102,000
180,000
$ 93,000
17-27. (20 min.) Sales Price and Activity Variances: Dylan & Father.
Actual
(AP x SQ)
Partner
Price Variance
Flexible Budget
(SP SV) x SQ
$770 x 4,800 hours
$3,612,000
= $3,696,000
$84,000 U
Staff
$3,738,000
= $3,712,800
$25,200 F
Flexible
Budget
AQ x (SP SV)
Master Budget
Mix Variance
= $3,662,400
= $3,715,233
$52,833 U
$101,727 U
$154,560 U
Activity Variance
Quantity
Variance
17-14
SQ x (SP SV)
5,100 x $406 +
20,790 x $84
= $3,816,960
Actual Costs
Price
Variance
Actual Inputs at
Standard Price
Efficiency
Variance
$12 x 3,000 =
$36,000
$45,240
$9,240 U
$12 x (14,000 4)
= $42,000
$6,000 F
17-15
Flexible Budget
(Standard
Allowed)
Solutions to Problems
Mix
Variance
Flexible Budget
AQ x (SP SV)
Quantity
Variance
Master Budget
= $51,500.00
=$50,937.50
= $52,975.00
$562.50 F
$2,037.50 U
$1,475 U
Activity Variance
17-16
Purchases
Actual
Variances
Sales revenuea....................................................
$1,200
Variable costs:
Purchases........................................................
780
$60 U
Hourly wages...................................................
60
Franchise fee...................................................
36
Utilities.............................................................
76
Total variable costs.............................................
$952
$60 U
Contribution margin.............................................
$248
$60 U
Fixed costs: ........................................................
Advertising.......................................................
100
Depreciation.....................................................
50
Lease...............................................................
30
Salaries............................................................
30
Total fixed costs..................................................
$210
Operating profit....................................................
$ 38
$60 U
($000)
Marketing &
Administrative
Variances
$8 F
$8 F
$8 F
$8 F
17-17
Flexible
Budget
$1,200
720 b
60 c
36 d
84 e
$900
$300
100
50
30
30
$ 210
$90
Activity
Variance
$200 F
Master
Budget
$1,000
120 U
10 U
6U
14 U
$ 150 U
$ 50 F
600
50
30
70
$750
$250
$50 F
100
50
30
30
$ 210
$ 40
17-30. (continued)
a Sales revenue is used as the basis of volume measurement because there are no price changes.
b
$600
x $1,200
$1,000
c
$50
x $1,200
$1,000
d
$30
x $1,200
$1,000
e
$70
x $1,200
$1,000
17-18
Correspondence,
Supplies, etc.
Actual Costs
$10,800 x 1.12
= $12,096
Combined
Price and
Efficiency
Variance
Flexible Budget
(Standard Allowed
for Actual Output)
$45 x 240
= $10,800
$1,296 U
Loan processor and
other costs
0.5 x ($60,000 +
$50,000 + $130,000)
= $120,000
$55,000 + $63,000
= $118,000
$2,000 F
Optional:
If computed, the production volume variance would be:
Budget
$120,000
a 0.5
$8,000 F
17-19
Applied
$120,000 x (240
225) = $128,000
Actual
Costs
Price
Variance
Actual
Inputs at
Standard
Price
Efficiency
Variance
New
Accounts
$572,250
Flexible
Budget
$30 x
19,200
accounts
=
$576,000
(Ignored)
$3,750 F
Account
Maintenanc
e
$18,000
Master
Budget
$30 x
20,000
accounts
=
$600,000
$24,000 F
$0.45 x
45,000
=
$20,250
$17,700
$300 U
Activity
Variance
$2,550 F
17-20
$0.45 x
43,200
= $19,440
$810 U
17-33. Revenue Analysis Using Industry Data and Multiple Product Lines: Peninsula
Candy Co.
a. Sales price and activity variances.
(AP SV) x AQ
Flexible
budget
(SP SV) x AQ
Master
budget
(SP SV) x SQ
$1,162 $915b
= $247
(1,600 x $.03a)
+ (2,000 x $.04)
+ (4,200 x $.035)
= $275
$1,200 $920
= $280
a Unit
$28 U
$5 U
Sales price
variance
Sales activity
variance
$915 = [1,600 x ($140 2,000) + 2,000 x ($320 2,000) + 4,200 x ($460 4,000)].
b. Two solutions are possible when calculating the market share variance, depending
upon the figure used for the left column. The examples in the text use the flexible
budget amount. However, those examples involve only one product, whereas this
problem has three products, and therefore a mix issue is present. In this situation,
another way to solve the problem would be to use the standard price times the actual
quantities at the standard mix. Both alternatives are given on the following page.
17-21
17-33b.
(continued)
Contribution margin variance
Actual Quantities at
Standard Mix and
Standard Prices
Industry
Effect
$280 x (76,000 80,000)
= $266
$273a
Master
Budget
$280
$7 F
$14 U
Market Share
Variance
Industry Variance
Flexible Budget
$275
$7 U
Quantity
Variance
Industry Effect
$266
$9 F
$5 U
Master Budget
$280
$14 U
Activity Variance
The $2 difference in the market share variance is explained by the difference in the mix.
a $273 = [7,800 x (2,000 8,000) x ($60 2,000) + 7,800 x (2,000 8,000) x ($80 2,000) + 7,800 x (4,000 8,000) x
($140 4,000)].
A shortcut is to multiply the actual number of bars by the average contribution margin per bar in the master
budget: 7,800 bars x ($280 8,000 bars) = $273.
17-22
17-34. (20 min.)Sales Mix And Quantity Variances: Peninsula Candy Co.
Mix
Quantity
Flexible Budget
Variance
Variance
(SP SV) x AQ
(SP SV) x ASQ
(1,600 x $.03)
2,000
(7,800 x
x $.03)
8,000
+ (2,000 x $.04)
+
2,000
(7,800 x
x $.04)
8,000
+ (4,200 x $.035)
+
4,000
(7,800 x
x $.035)
8,000
= $275
= $273
$2 F
$7 U
$5 U
Activity Variance
17-23
Master Budget
(SP SV) x SQ
(2,000 x $.03)
+ (2,000 x $.04)
+ (4,000 x $.035)
= $280
17-35. (45 min.) Materials Mix And Yield Variances: Houston Corporation.
a. and b.
Material
Efficiency Variance
Actual
Purchase
(AP x
Price
AQ)
Variance
Flexible
Mix
(SP x AQ)
Variance
Z-Alpha
(SP x ASQ)
a
Yield
Production
Variance
Budget
$9 x (.48 x
$423,360
$9 x
104,400) =
50,400 =
$9 x 50,112
$9 x (600 x 80)
$453,600
= $451,008
= $432,000
$30,240 F
$2,592 U
$19,008 U
$21,600 U
Z-Beta
$12 x (.36 x
$400,464
$12 x
104,400) =
37,040 =
$12 x 37,584
$12 x (450 x
$444,480
= $451,008
80) = $432,000
$44,016 F
$6,528 F
$19,008 U
$12,480 U
Z-Gamma
$417,216
$10,176 U
$24 x
$24 x (.16 x
16,960
104,400) =
$24 x 16,704
$24 x (200 x
$407,040
= $400,896
80) = $384,000
$6,144 U
$16,896 U
$23,040 U
Standard mix: .48 = 600 1,250; .36 = 450 1,250; .16 = 200 1,250;
17-24
17-35. (continued)
Efficiency Variance
Purchase
Flexible
Price
Actual
Total
Variance
Mix
(SP x AQ)
Variance
(SP x ASQ)
Yield
Production
Variance
Budget
$1,241,04
0
$1,305,120
$64,080 F
$1,302,912
$2,208 U
$54,912 U
$57,120 U
17-25
$1,248,000
17-36. (30 min.) Labor Mix and Yield Variances: Davenport Construction Associates
a. and b.
Efficiency Variance
Purchase
Flexible
Price
Actual
Variance
Mix
(SP x AQ)
($26 x 660) +
($24 x 660) +
($23 x 780) +
($15 x 432)
= $41,580
$2,880 U
Variance
(SP x ASQ)
Yield
Production
Variance
Budget
($24 x 600) +
($21 x 780) +
+ ($21 x 1/3 x
($21 x 600) +
($15 x 432)
($15 x 600) =
= $38,700
x 1,872) = $37,440
$36,000
$1,260 U
$1,440 U
$2,700 U
17-26
17-37. (20 min.)Derive Amounts for Profit Variance Analysis: Aqua Clean, Inc.
Hint: Use last months actual as master budget.
Actual (based
on actual
Variable
activity of
Cost
161
Variance
cleanings)
Sales revenue.....................................................
$22,800
Less:
Variable costs..................................................
5,220
$93 F
Contribution margin.............................................
$17,580
$93 F
aLast month price =
$22,680
140 cleanings
Sales
Price
Variance
$3,282 U
$3,282 U
Flexible Budget
(based on
actual activity
of 161
cleanings)
$26,082 a
5,313 b
$20,679
Sales
Activity
Variance
Master Budget
(based on a
prediction of
140 cleanings)
$3,402 F
$22,680
693 U
$2,709 F
4,620
$18,060
= $162
Although the two months contribution margins are similar, there are significant variances. This illustrates the need to
consider variance analysis even if bottom-line dollar amounts are similar to budget. Activity levels, prices, and other factors
might offset each other, but individually be significant.
The number of cleanings increased by 21, which increased profit by $2,709. However, the actual average price was $141.61
(= $22,800 161 cleanings) so the average price per cleaning decreased by $20.39 ($162.00 $141.61). As a result, profit
decreased by $480.
17-27
17-28
Solutions to Case
17-29
17-39. (continued)
17-30
17-39. (continued)
Exhibit AComparison of Master Budget to Actual Results.
Actual
Sales......................................... $90,000
Less Variable Costs:
Materials................................ 37,990
Labor..................................... 19,392
Overhead...............................
1,440
Contribution Margin................... $31,178
Less Fixed Costs:
Manufacturing........................
3,810
Selling and Administrative.....
7,200
Operating Profit......................... $20,168
Manufacturing
Variance
Selling and
Administrativ
e Variance
0
$ 490 U
392 U
140 U
$1,022 U
50 U
$1,072 U
$300
$300
17-31
F
F
Master
Budget
$72,000
37,500
19,000
1,300
$32,200
U
U
U
F
30,000
15,200
1,040
$25,760
3,760
7,500
$20,940 $6,440 F
3,760
7,500
$14,500
17-39. (continued)
String
Actual Costs
$.025 x 175,000
= $4,375
Price
Variance
Actual Inputs
at Standard
Price
$.03 x 175,000
= $5,250
$875 F
Frames
$3.15 x 7,100 =
$22,365
$3.15 x 7,100 =
$22,365
$9.80 x 900
= $8,820
$9.60 x 900 =
$8,640
$5.80 x 840 =
$4,872
$9.60 x .125 x
7,000 = $8,400
240 U
$5.60 x 840 =
$4,704
$168 U
Variable
Overhead
$3.15 x 7,000 =
$22,050
315 U
$180 U
Unskilled
Labor
$5.60 x .125 x
7,000 = $4,900
196 F
Total Variable
Overhead
Variance
$1,050
Flexible Budget
$.03 x 20 x 7,000
= $4,200
1,050 U
$-0Skilled
Labor
Efficiency
Variance
($.10 + $.03)
x 7,000 = $910
$140 U
Fixed
Overhead
Actual Costs
Price
Variance
$3,810
Budget
$.47 x 8,000 =
$3,760
$50 U
Production
Volume
Variance
470 U
17-32
Applied
($.47 x 7,000)
= $3,290
17-39. (continued)
The variance breakdown in Exhibits A and B highlights the areas that Elmo and Otto
should research. One area involves the strings. Is the combination of a favorable price
variance and unfavorable efficiency variance an indicator that low quality string was
purchased? Another point for investigation is the apparent waste of 100 racket frames. Is
there something in the production process that causes frames to break? Or are the
standards unrealistic? A third area is the labor efficiency variances. Why are the skilled
workers spending more time than budgeted, while the unskilled are spending less?
Finally, the relationship between labor efficiency and materials efficiency variances is
worth investigating, because use of substandard materials might result in an unfavorable
labor efficiency variance. These are the types of questions that should be raised as a
result of this variance analysis.
17-33