Chapter 17 - Additional Topics in Variance Analysis
17-15 (15 min.) Variable Cost Variances: Materials Purchased And Used Are Not
Equal: Golden Company.
Flexible
Budget
Actual
Inputs at
(Standard
Actual
Price
Standard
Efficiency
Allowed for
Costs
Variance
Price
Variance
Good Output)
Purchase
$175,000
$172,000
Computations
$3,000 U
$8 x 14,000
= $112,000
$111,000
Usage
Computations
$1,000 F
17-16 (15 min.) Industry Volume And Market Share Variances: Kay’s 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
= $180,000
= $240,000
$4 x 20% x
250,000
= $200,000
$60,000 U
$40,000 F
$20,000 U
17-1
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Chapter 17 - Additional Topics in Variance Analysis
17-19 (20 min.) Sales Mix And Quantity Variances: AAA Electronics.
a. and b.
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
15,000 x ($120 - $50)
23,000 x (20,000/25,000) x ($120 - $50)
20,000 x ($120 - $50)
+ 8,000 x ($260 - $100)
+23,000 x (5,000/25,000) x ($260 - $100)
+ 5,000 x ($260 - $100)
= $2,330,000
= $2,024,000
= $2,200,000
$306,000 F
$176,000 U
$130,000 F
Activity Variance
17-2
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-22 (35 min.) Materials Mix and Yield Variances: Huron Group.
a. and b.
Efficiency Variance
Actual
(AP x AQ)
Purchase
Price
Variance
Material:
Twin
$18 x
kle
44,000 =
$792,000
(SP x AQ)
Mix
Variance
$20 x 44,000
= $880,000
$88,000 F
(SP x ASQ)
Yield
Variance
Flexible
Production
Budget
(SP x SQ)
$20 x (1/3 x 120,000)
$20 x (20 x 2,000)
= $20 x 40,000
= $20 x 40,000
= $800,000
= $800,000
$80,000 U
$-0-
Efficiency Variance = $80,000 U
Sta
r
$32 x 76,000
= $2,432,000
$30 x 76,000
= $2,280,000
$152,000 U
$30 x (2/3 x 120,000)
$30 x (40 x 2,000)
= $30 x 80,000
= $30 x 80,000
= $2,400,000
= $2,400,000
$120,000 F
$-0-
Efficiency Variance = $120,000 F
Tot
al
$3,224,000
$3,160,000
$64,000 U
$3,200,000
$40,000 F
= $3,200,000
$-0-
Efficiency Variance = $40,000 F
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.
17-3
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-24 (35 min.) Labor Mix and Yield Variance: Matt’s Eat ‘N Run.
a. and b.
Efficiency Variance
Actual
(AP x
AQ)
Labor:
Skilled
Purchase
Price
Variance
$125,000
(SP x AQ)
Mix
Variance
$20 x 6,000
= $120,000
$5,000 U
(SP x
ASQ)
Yield
Variance
Flexible
Production
Budget
(SP x SQ)
$20 x (0.25 x 21,000) $20 x (2/60 x 180,000)
= $20 x 5,250
= $20 x 6,000
= $105,000
= $120,000
$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
$7,500 F
$90,000 U
$10 x (6/60 x 180,000)
= $10 x 18,000
=
$180,000
$22,500 F
Efficiency Variance = $30,000 F
Total
$365,000
$270,000
$262,500
$95,000 U
$7,500 U
= $300,000
$37,500 F
Efficiency Variance = $30,000 F
17-4
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-25 (10 min.) Flexible Budgeting—Service Organization: Lowe & Rent.
Flexible Budget
(based on
actual of
6,900 hours)
Revenue ........................
Costs:
Professional salaries ...
Other variable costs ....
Fixed costs ..................
Total costs.................
Profit ..............................
$862,500a
431,250b
117,300c
180,000d
$728,550
$133,950
a
6,900 hrs.
x $750,000
6,000 hrs.
b
6,900 hrs.
$431,250 =
x $375,000
6,000 hrs.
c
6,900 hrs.
$117,300 =
x $102,000
6,000 hrs.
d
$180,000 = Master budget fixed costs
$862,500 =
17-5
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-26 (20 min.) Sales Activity Variance—Service Organization: Lowe & Rent.
Flexible
Budget (based
on actual of
6,900 hours)
Revenue ...........................
Costs:
Professional salaries ......
Other variable costs .......
Fixed costs .....................
Total costs ...................
Profit .................................
Master Budget
(based on
budgeted
6,000 hours)
Sales
Activity
Varianc
e
$862,50
0
$112,5
00
F
$750,000
431,250
117,300
180,000
$728,55
0
$133,95
0
56,250 U
15,300 U
_______
$71,55 U
0
$ F
40,950
375,000
102,000
180,000
$657,000
$ 93,000
17-6
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-27 (30 min.) Profit Variance Analysis—Service Organization: Lowe & Rent.
(1)
(2)
(3)
(4)
Actual
(6,900 hrs.)
Revenue ...........
Professional
salaries .............
Other variable
costs .................
Fixed costs .......
Profit .................
$825,00
0
465,000
108,000
174,000
$
78,000
Cost
Variance
s
$33,750
U
9,300
F
6,000
F
$18,450
U
Price
Varianc
es
$37,50
0U
(5)
Flexible
Budget
(6,900 hrs.)
Sales
Activity
Variance
$862,500
$112,50
0F
56,250
U
15,300
U
431,250
117,300
180,000
$37,50
0U
$
133,950
(6)
Master
Budget
(6,000 hrs.)
$750,00
0
375,000
102,000
180,000
$
40,950
F
$
93,000
17-7
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-28 (20 min.) Sales Price and Activity Variances: Dylan & Father.
Actual
(AP x AQ)
Partner
Price Variance
$3,612,000
Flexible Budget
(SP x AQ)
$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
AQ x (SP –
SV)
Master Budget
Mix Variance
4,800 x ($770 - $364)
+ 20,400 x ($182 $98)
=
(SP – SV) x ASQ
Quantity
Variance
a
SQ x (SP – SV)
[$406 x (5,100 ÷ 25,890) x 25,200] +
b
[($84 x (20,790 ÷ 25,890) x 25,200]
5,100 x $406 +
20,790 x $84
= $3,715,233
= $3,816,960
$3,662,400
$52,833 U
$101,727 U
$154,560 U
Activity Variance
a
$406 = $770 – $364.
b
$84 = $182 – $98.
17-8
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-31 (20 min.) Sales Mix And Quantity Variances: Mattie’s Vineyards.
a. Price Variance = (Actual Price − Budgeted Price) x Actual Quantity:
Price
= (Actual Price − Budgeted Price) x Actual Quantity
Variety:
Variance
Sauvignon
$2,000 F =
($7.25 − $7.00)
x
8,000
Blanc
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)
25,000 x (10,400/26,000) x ($7.00 - $5.00)
10,400 x ($7.00 - $5.00)
+ 6,000 x ($8.25 - $6.00)
+ 25,000 x (3,900/26,000) x ($8.25 - $6.00)
+ 3,900 x ($8.25 - $6.00)
+ 11,000 x ($6.75 - $4.75)
+ 25,000 x (11,700/26,000) x ($6.75 - $4.75)
+ 11,700 x ($6.75 - $4.75)
= $51,500.00
= $50,937.50
= $52,975.00
$562.50 F
$2,037.50 U
$1,475 U
Activity Variance
17-9
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
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
Sales revenuea ............... $1,20
0
Variable costs:
Purchases ....................
780
Hourly wages................
Franchise fee................
Utilities ..........................
Purchases
Variances
Contribution margin ........ $248
Fixed costs: ...................
Advertising ..................
100
Depreciation ................
50
Lease ..........................
30
Salaries .......................
30
Total fixed costs.............. $210
Operating profit ............... $ 38
Flexible
Budget
Acti
Varia
$1,20
0
$60
U
60
36
76
Total variable costs......... $952
Marketing &
Administrati
ve
Variances
$60
U
$60
U
$60
U
720
$8
F
$8
F
$8
F
$8
F
60
36
84
$2
b
c
d
e
120
10
6
14
$900
$ 1
$300
$
100
50
30
30
$ 210
$
90
Notes on the following page.
17-10
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
$
Chapter 17 - Additional Topics in Variance Analysis
17-32. (continued)
a Sales revenue is used as the basis of volume measurement because there are no price
changes.
b $600
$1,200
$1,00 x
0
c $50
$1,200
x
$1,00
0
d $30
$1,200
$1,00 x
0
e $70
$1,200
x
$1,00
0
17-11
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-36 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 $0.03a)
+ (2,000 x $0.04)
+ (4,200 x $0.035)
= $275
$1,200 – $920
= $280
a Unit
$28 U
$5 U
Sales price
variance
Sales activity
variance
contribution margins calculated from master budget panel as follows:
Unit margin = Contribution margin ÷ Sales units.
b
$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.
17-12
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-36b.
(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
$7 U
Quantity
Variance
Flexible Budget
$275
Industry Effect
$266
$9 F
Master Budget
$280
$14 U
$5 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.
17-13
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-37 (20 min.) Sales Mix And Quantity Variances: Peninsula Candy Co.
Mix
Quantity
Flexible Budget
Varian
Variance
ce
(SP – SV) x AQ
(SP – SV) x ASQ
(1,600 x $0.03)
(7,800 2,0
x
x 00
$0.03)
8,0
00
+ (2,000 x
+
(7,800 2,0
x
$0.04)
x 00
$0.04)
8,0
00
+ (4,200 x
+
(7,800 4,0
x
$0.035)
x 00
$0.035)
8,0
00
= $275
= $273
$2 F
Master Budget
(SP – SV) x SQ
(2,000 x $0.03)
+ (2,000 x $0.04)
+ (4,000 x
$0.035)
= $280
$7 U
$5 U
Activity Variance
17-14
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duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-38 (45 min.) Materials Mix And Yield Variances: Houston Corporation.
a. and b.
Efficiency Variance
Actual
Material
Purchase
(AP x
Price
AQ)
Variance
Flexible
Mix
(SP x AQ)
Variance
Z-Alpha
$423,360
(SP x ASQ)
a
$9 x (.48 x
Yield
Production
Variance
Budget
$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
a
$12 x (.36 x
Z-Beta
$400,464
$12 x
104,400) =
37,040 =
$12 x 37,584
$12 x (450 x 80)
$444,480
= $451,008
= $432,000
$44,016 F
$6,528 F
$19,008 U
$12,480 U
Z-Gamma
a
$24 x (.16 x
$24 x
$417,216
$10,176 U
16,960
104,400) =
=
$24 x 16,704
$24 x (200 x 80)
$407,040
= $400,896
= $384,000
$6,144 U
$16,896 U
$23,040 U
a
Standard mix: .48 = 600 ÷ 1,250; .36 = 450 ÷ 1,250; .16 = 200 ÷ 1,250.
17-15
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 17 - Additional Topics in Variance Analysis
17-38. (continued)
Efficiency Variance
Purchase
Flexible
Price
Actual
Total
Variance
$1,241,040
Mix
(SP x AQ)
Variance
$1,305,120
$64,080 F
(SP x ASQ)
Yield
Production
Variance
Budget
$1,302,912
$2,208 U
$1,248,000
$54,912 U
$57,120 U
17-16
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.