Strategic Performance
Management: VARIANCES
Isabelle MIROIR LAIR
2019 -2020
1-C1 Cost and Variance Measures
The Flow of cost
• INPUTS
Direct Material
Direct Labor
Variable Overhead
Fixed Overhead
• OUTPUT
Finished
GOODS
• INCOME STATEMENT
COGS
Cost of GOODS
sold
Developing a standard cost for a tennis racquet
Static budget
Selling price
$120
Volume
30,000 units
Input
Input/unit of
production
Cost per unit of
Input
Cost /unit of
production
Direct Material
1 pound /u
$60/pound
$60
Direct Labour
2 DLH /u
$8/DLH
$16
Variable Overhead
1.2 machine-hr
$10/mach-hr
$12
Total Variable Cost
$88
Unit Fixed Overhead
$10 per unit
Total Unit Cost
$98
Example: assume you receive the financial data of last period
compared to budget
Actual results
Units sold
Budgeted results
variances
24,000
30,000
Sales Revenue
3,000,000
3,600,000
-600,000
Direct material
1,491,840
1,800,000
-308,160
Direct labour
475,200
480,000
-4,800
Variable manuf overhead
313,200
360,000
-46,800
Contribution margin
719,760
960,000
-240,240
Fixed manufacturing costs
Fixed SGA costs
294,000
390,000
300,000
390,000
-6,000
0
35,760
270,000
-234,240
EBIT
You can compute variances but you can’t analyze them because they are based on
various levels of activity
Example: 1) to put together the various variable or fixed costs
2) to compute the flexible budget
Actual results
Units sold
Flexible
Budget Var
Flexible
budget
Volume
variance
Static budget
24,000
24,000
30,000
Sales Revenue
3,000,000
2,880,000
3,600,000
Variable costs
2,280,240
2,112,000
2,640,000
Contribution margin
719,760
768,000
960,000
Fixed costs
684,000
690,000
690,000
35,760
78,000
270,000
EBIT
DM + DL + Var. Overhead costs = Variable costs
Fixed Manufacturing + SGA costs = Fixed costs
Flexible budget = actual volume x standard unit cost or price
Flexible Budget
• A flexible budget
is a restatement of the original budget
that have been adjusted to the actual level of activity
units
30 000
Static Budget
flexible Budget
24 000
costs
Example:
Budget based on 24 000 units (instead of 30 000)
Actual results
Units sold
Flexible
Budget Var
Flexible
budget
Volume
variance
Static
budget
24,000
24,000
30,000
Sales Revenue
3,000,000
2,880,000
3,600,000
Variable costs
2,280,240
2,112,000
Contribution margin
719,760
768,000
960,000
Fixed costs
684,000
690,000
690,000
35,760
78,000
270,000
EBIT
26400000x24000
30000
2,640,000
Sales & variable expenses are adjusted based on the per-unit value and the actual units sold
Example: normally a decrease of 6,000 units should have
decreased the EBIT by $192,000 but…
Actual results
Units sold
Flexible
Budget Var
Flexible
budget
Volume
variance
Static budget
24,000
24,000
-6,000
30,000
Sales Revenue
3,000,000
2,880,000
-720,000
3,600,000
Variable costs
2,280,240
2,112,000
-528,000
2,640,000
Contribution margin
719,760
768,000
-192,000
960,000
Fixed costs
684,000
690,000
0
690,000
35,760
78,000
-192,000
270,000
EBIT
Volume Variance = Flexible Budget – Static Budget
Example:
But the change in prices and consumptions has
produced another variance
Actual results
Flexible
Budget Var
24,000
0
24,000
-6,000
30,000
Sales Revenue
3,000,000
120,000
2,880,000
-720,000
3,600,000
Variable costs
2,280,240
168,240
2,112,000
-528,000
2,640,000
Contribution margin
719,760
-48,240
768,000
-192,000
960,000
Fixed costs
684,000
-6,000
690,000
0
690,000
35,760
-48,240
78,000
-192,000
270,000
Units sold
EBIT
Flexible
budget
Flexible Budget Variance = Actual results - Flexible Budget
Volume
variance
Static budget
Example
Actual results
Flexible
Budget Var
24,000
0
24,000
-6,000
30,000
Sales Revenue
3,000,000
120,000
2,880,000
-720,000
3,600,000
Variable costs
2,280,240
168,240
2,112,000
-528,000
2,640,000
Contribution margin
719,760
-48,240
768,000
-192,000
960,000
Fixed costs
684,000
-6,000
690,000
0
690,000
35,760
-48,240
78,000
-192,000
270,000
Units sold
EBIT
Flexible
budget
Flexible Budget Variance = -48,240
Volume
variance
Static budget
Volume Variance = -192,000
Total Variance = 35,760 – 270,000 = -234,240
There is no need to go further with the volume variance
BUT
The flexible budget variance covers # variances
Price
Variance
Quantity
Variance
And will be detailed per expenses
Indirect costs vs Direct Costs
Variable
Overhead
Fixed
Overhead
• Indirect costs:
•
•
•
•
•
•
•
•
Indirect labor
Supplies
Tools
Equipment (depreciation, ..)
Rent
Insurance
Property tax
Training & hiring
• Direct costs
• Direct materiel
• Direct labor
The flexible budget variance Framework

Volume of output is the same for actual or budgeted data
Flexible Budget
Actual Results
Actual Quantity
Actual Quantity
Standard Quantity
×
Actual Price
×
Standard Price
×
Standard Price
Price
Quantity
Variance
Variance
• To analyze the variances between the flexible budget and the actual results, it is
necessary to detail into quantity and price
Example

Volume of output is the same for actual or budgeted data
Flexible Budget
Actual Results
900 kg
Actual Quantity
1,000 kg
×
€11
×
Standard Price
×
€10
Price
Quantity
Variance
Variance
• Price variance =
• Quantity variance =
The DM Variance: an exception!
Actual Results
Flexible Budget
Actual Qty purchased
Actual Qty purchased
Actual Qty used
Standard Quantity
×
Actual Price
×
Standard Price
×
Standard Price
×
Standard Price
Price
Quantity
Variance
Variance
DM Price Variance = (AP – SP) Qp
DM Usage Variance= (AQu – SQ) SP
• The quantity purchased is taken for the price variance
• The quantity used is taken for the quantity variance
Direct material variance
Actual
results
Flexible
Budget Var.
Flexible
budget
Units sold
24,000
0
24,000
DM costs
1,491,840
51,840
1,440,000
Additional information: purchases = 25,000 pounds for $1,839,840
Price per pound= 1839840/25000= $73.5936 per pound purchased
Usage = 19,200 pounds in the production of 24,000 units
 25,000 × $73.5936 = $1,839,840
 24,000 × $60 = $1,440,000
 Price Variance =
 Quantity Variance =
51,840
The Direct Labor Variance:
Actual hours = hours used
Actual hours
×
Actual Rate
Standard hours = hours allowed
Standard hours
×
Standard Rate
Actual hours
×
Standard Rate
Rate
efficiency
Variance
Variance
RateVariance = (AR – SR) AH
Efficiency Variance= (AH – SH) SR
Direct Labor variance
Actual
results
Flexible
Budget Var.
Flexible
budget
Units sold
24,000
0
24,000
DL costs
475,200
91,200
384,000
Additional information: Labor reporting records show that
52,800 DLH costed $475,200 for 24,000 units => average hour rate= $9
 52,800 x $9 = $475,200
 Standard hours = 24,000 x 2h = 48,000 hours
 48,000 × $8 = $384,000
 DL Rate Variance =
 DL Efficiency Variance =
91,200
Fixed and Variable manufacturing overhead costs
Can be computed per hour or unit
Variable Manufacturing
Overhead
• Indirect labor
• Supplies
• Tools
Rate = VOH / DLH
Fixed Manufacturing
Overhead
•
•
•
•
•
Equipment
Rent
Insurance
Property tax
Training & hiring
Rate = FOH / DLH
The Variable Overhead Variance: VOH Variance
Total actual costs can be detailed as Actual VOH rate × Actual hours
Total Actual
Costs
Actual hours
×
Standard VOH Rate
Spending
efficiency
Variance
Variance
Standard hours
×
Standard VOH Rate
Spending Variance = (Actual VOH rate × Standard VOH rate) × Actual hours
Efficiency Variance= (Actual hours - Standard hours) × Standard VOH rate
Variable Overhead variance
Actual
results
Flexible
Budget Var.
Flexible
budget
Units sold
24,000
0
24,000
VOH costs
313,200
25,200
288,000
Additional information:
actual machine-hours = 28,000 hours for a cost : $313,200
 average hour rate= $313,200 / 28,000 = $11.1857
 Standard hours = 24,000 x 1.2h = 28,800 hours at $10
 VOH SpendingVariance =
 VOH Efficiency Variance =
25,200
Fixed Overhead
• We haven’t any volume variance on the fixed costs because they are
fixed!
• BUT By establishing a fixed overhead rate and applying these costs to
each unit of output, the overhead cost application process treats
these fixed costs as if they were variable. (for the absorption cost)
• It creates an important management signal regarding how the actual
production output compares to the expected production output.
The Fixed Manufacturing Overhead Variance:
Total Actual FOH
Costs
Budgeted FOH
Total Applied FOH
Budgeted
Production Volume
Actual Production
Volume
×
Standard FOH Rate
×
Standard FOH Rate
Spending
ᴫ Volume
Variance
Variance
Spending Variance =Actual FOH costs – budgeted FOH costs
Production Volume Variance= Budgeted FOH – Applied FOH =
(Budgeted production volume – Actual production volume) × Standard FOH Rate
Fixed Manufacturing Overhead variance
Actual
results
Flexible
Budget Var.
Flexible
budget
Units sold
24,000
0
24,000
DM costs
294,000
-6,000
300,000
A simple comparison of actual spending to the fixed overhead budget provides the
FOH spending variance
 FOH spending Variance = actual FOH – budgeted FOH = 294,000 – 300,000 =
- 6,000 Favorable
BUT it is not that simple!
Fixed Overhead Variance
Fixed overhead variances
350
Spending variance
Production volume variance
E
D
300
B
250
F
100
Budgeted FOH
150
actual FOH
applied FOH
200
C
A
50
0
FOH applied 0
5
10
15
20
25
30
In an absorption costing
system, fixed overhead must
be expressed on the basis of
dollars per unit of activity,
and the amount must be
absorbed as product is
manufactured.
=> the firm divides the
budgeted FOH by the level of
activity:
300,000/30,000 =$10 per unit
For 24,000 units the amount
absorbed = 240,000 = CF
The production volume
variance = $60,000 =
budgeted FOH– applied
FOH
Fixed Overhead Variance
• Spending Variance =Actual FOH – Budgeted FOH = ED
=
• Volume Variance = Budgeted FOH – Applied FOH = FE
=
• Total FOH Variance = Actual FOH – Applied FOH = DF
Sales Revenues and Sales Variances
The Sales Variances
 For one product
Actual volume
×
Actual Price
Expected volume
×
Standard Price
Actual volume
×
Standard Price
Price
Volume
Variance
Variance
Price Variance = (AP – SP) AV
Volume Variance= (AV – SV) SP
Sales Variances
Units sold
Sales Revenue
Actual
results
Flexible
Budget Var
Flexible
budget
Volume
variance
Static
Budget
24,000
0
24,000
-6,000
30,000
3,000,000
120,000
2,880,000
-720,000
3,600,000
Actual Price = 3000000/24000 = 125
Standard Price = 3600000/30000 = 120
Price Variance = (AP – SP) AV =
Volume Variance = (AV – SV) SP =
Example 0: exo Variance 1 product
The Sales Variances
 For several products
Actual volume
×
Actual Price
Actual volume
×
Standard Price
Price
 Price variance does not
change and is
computed per product
Variance
Price Variance = (AP – SP) AV
 Volume Variance?
Volume Variance
 For several products
• The Sales volume variance results not only from selling more or less
total volume of goods and services, but also from selling relatively
more or less of one type of product versus another.
• The Sales volume Variance represents how much revenue will
increase due to increased sales, but it doesn't represent how much
the operating profit will increase.
• Because increased sales volume not only increases revenue but also
increases the variable costs.
the variances are computed based on contribution margin
Sales Volume Variances with 2 products

Based on contribution margin
Actual volume
×
Standard CM
Expected volume
×
Standard CM
Volume
Variance
Actual volume
×
Actual Mix %
×
Standard CM
Mix and Quantity Variances
are subsets of the Volume
Variance
Actual volume
×
Expected Mix %
×
Standard CM
Mix
Variance
Expected volume
×
Expected Mix %
×
Standard CM
Total Quantity
Variance
Example: with 2 products
Sunbird Boat Company is selling two models of boat: the Classic in oak and the Deluxe
in teak
Actual Data
Actual Volume
Budgeted Data
Classic
Deluxe
150
50
Classic
Deluxe
164
41
Standard Price
$4,200
$9,400
Standard Variable cost
$2,785
$6,315
Standard CM
$1,415
$3,085
Expected Volume
Actual Mix :
Total volume = 150 + 50 = 200; Classic =
Expected Mix :
Total volume = 164 + 41 = 205; Classic =
= 75% ; Deluxe =
= 25%
= 80% ; Deluxe =
= 20%
Sales Volume Variances with Sunbird
Actual volume
150 & 50
×
Standard CM
1415 & 3085
Expected volume
164 & 41
×
Standard CM
1415 & 3085
Actual volume
×
Actual Mix %
200 x 75% & 200 x
25%
×
Standard CM
1415 & 3085
Actual volume
×
Expected Mix %
200 x 80% & 200 x
20%
×
Standard CM
1415 & 3085
Expected volume
×
Expected Mix %
205 x 80% & 205 x
20%
×
Standard CM
1415 & 3085
Volume variance with 2 products
• Volume variance = (Actual Vol. - Expected Vol.) x Standard CM =
(150-164) 1415 + (50-41) 3085 = $7,955 F
• Mix variance =
• Quantity variance =
[Actual Vol. – (Actual vol. x Exp.Mix)] Stand.CM
[(Actual Vol. x Exp.Mix) – Expect. vol.] Stand.CM
= (150 – (200x80%)) x 1415 = -14,150
& (50 – (200x20%)) x 3085 = 30,850
= ((200x80%) - 164) x 1415 = -5,660
& ((200x20%) – 41) x 3085 = -3,085
Total Mix variance = $16,700
Total Quantity variance = -8,745
• Volume variance = Mix variance + Quantity variance
= $16,700 – 8,745 = $7,955 F
Example 1
• DM Cost variance :
1)
Budgeted units : 10 000 units
Direct materiel unit cost: € 4,5 per kg
Direct material per unit: 0,5kg
2)
Actual results : 11 000 units
Direct materiel cost: 5610 kg x € 4= €22 440
• Analyse the variance between the budgeted cost and the actual ones.
38
Example 2
(cost accounting Pearson)
static budget
units of LLL produced and sold
180 000
151 200
150
140
1 200
1 080
5
5,25
6 000
5 670
14
14,5
84 000
82 215
batch size (units per batch)
number of batches (line1/line2)
labour hours per batch
total labour hours (line3xline4)
cost per hour in $
total cost
actual result
1) Compute the cost variances
39
MCQ on DM & DL Cost Variances
Question 2
The following direct labor information pertains to the manufacturing of product Glu:
Time required to make one unit
Number of direct workers
50
Number of productive hours per week, per worker
40
Weekly wages per worker
Workers’ benefits treated as direct labor costs
What is the standard direct labor cost per unit of Glu?
A - $30
B - $25
C - $15
D - $12.5
2 direct labor hours
$500
20% of wages
Chair Company
Standard Cost Sheet - Plastic Chair
Direct materials (plastic) - pounds
Input
Quantity Cost per Input
Cost per
Chair
4.0 pounds $12 per pound
$48.00
Direct labor (molders) - direct labor hours
0.5 DLH
$20.00 per
DLH
$10.00
Direct labor (finishers) - direct labor hours
1.0 DLH
$25.00 per
DLH
$25.00
Variable manufacturing overhead - total
DLH
1.5 DLH $5.00 per DLH
$7.50
Fixed manufacturing overhead - total DLH
1.5 DLH $7.50 per DLH
$11.25
Total Cost to Manufacture
Variable selling overhead - chairs
$101.75
1 chair $5.00 per chair
Total Cost to Deliver
$5.00
$106.75
Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in
this case that manufacturing overhead (MOH) costs are being allocated on the basis of total
direct labor hours (DLH).
CC also disclosed the following actual information:
•
•
•
5,000 pounds of plastic was purchased for $63,750 of which 4,600 was used in
production.
Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total
of $29,000 to work 1,050 hours.
1,100 plastic chairs were produced and sold during the year.
What is the direct materials price variance based on the above information?
Chair Company
Standard Cost Sheet - Plastic Chair
Direct materials (plastic) - pounds
Input
Quantity Cost per Input
Cost per
Chair
4.0 pounds $12 per pound
$48.00
Direct labor (molders) - direct labor hours
0.5 DLH
$20.00 per
DLH
$10.00
Direct labor (finishers) - direct labor hours
1.0 DLH
$25.00 per
DLH
$25.00
Variable manufacturing overhead - total
DLH
1.5 DLH $5.00 per DLH
$7.50
Fixed manufacturing overhead - total DLH
1.5 DLH $7.50 per DLH
$11.25
Total Cost to Manufacture
Variable selling overhead - chairs
$101.75
1 chair $5.00 per chair
Total Cost to Deliver
$5.00
$106.75
Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in
this case that manufacturing overhead (MOH) costs are being allocated on the basis of total
direct labor hours (DLH).
CC also disclosed the following actual information:
•
•
•
5,000 pounds of plastic was purchased for $63,750, of which 4,600 was used in
production.
Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total
of $29,000 to work 1,050 hours.
1,100 plastic chairs were produced and sold during the year.
What is the direct labor rate variance based on the above information?
Chair Company
Standard Cost Sheet - Plastic Chair
Direct materials (plastic) - pounds
Input
Quantity Cost per Input
Cost per
Chair
4.0 pounds $12 per pound
$48.00
Direct labor (molders) - direct labor hours
0.5 DLH
$20.00 per
DLH
$10.00
Direct labor (finishers) - direct labor hours
1.0 DLH
$25.00 per
DLH
$25.00
Variable manufacturing overhead - total
DLH
1.5 DLH $5.00 per DLH
$7.50
Fixed manufacturing overhead - total DLH
1.5 DLH $7.50 per DLH
$11.25
Total Cost to Manufacture
Variable selling overhead - chairs
$101.75
1 chair $5.00 per chair
Total Cost to Deliver
$5.00
$106.75
Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in
this case that manufacturing overhead (MOH) costs are being allocated on the basis of total
direct labor hours (DLH).
CC also disclosed the following actual information:
•
•
•
5,000 pounds of plastic was purchased for $63,750 of which 4,600 was used in
production.
Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total
of $29,000 to work 1,050 hours.
1,100 plastic chairs were produced and sold during the year.
What is the direct materials usage variance based on the above information?
Chair Company
Standard Cost Sheet - Plastic Chair
Direct materials (plastic) - pounds
Input
Quantity Cost per Input
Cost per
Chair
4.0 pounds $12 per pound
$48.00
Direct labor (molders) - direct labor hours
0.5 DLH
$20.00 per
DLH
$10.00
Direct labor (finishers) - direct labor hours
1.0 DLH
$25.00 per
DLH
$25.00
Variable manufacturing overhead - total
DLH
1.5 DLH $5.00 per DLH
$7.50
Fixed manufacturing overhead - total DLH
1.5 DLH $7.50 per DLH
$11.25
Total Cost to Manufacture
Variable selling overhead - chairs
$101.75
1 chair $5.00 per chair
Total Cost to Deliver
$5.00
$106.75
Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in
this case that manufacturing overhead (MOH) costs are being allocated on the basis of total
direct labor hours (DLH).
CC also disclosed the following actual information:
•
•
•
5,000 pounds of plastic was purchased for $63,750 of which 4,600 was used in
production.
Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total
of $29,000 to work 1,050 hours.
1,100 plastic chairs were produced and sold during the year.
What is the direct labor efficiency variance based on the above information?
MCQ on Overhead
MCQ
The following information is available from the Tyro Company:
Actual factory overhead
$15,000
Fixed overhead expenses, actual
$ 7,200
Fixed overhead expenses, budgeted
$ 7,000
Actual hours
3,500
Standard activity allowed
3,650
Standard hours
3,800
Variable overhead rate per direct labor hour
$ 2.50
What is the variable overhead spending variance?
A - $950 Unfavorable
B - $950 Favorable
C - $375 Unfavorable
D - $375 Favorable
MCQ
The following information is available from the Tyro Company:
Actual factory overhead
$15,000
Fixed overhead expenses, actual
$ 7,200
Fixed overhead expenses, budgeted
$ 7,000
Actual hours
3,500
Standard activity allowed
3,650
Standard hours
3,800
Variable overhead rate per direct labor hour
$ 2.50
What is the variable overhead efficiency variance?
A - $950 Unfavorable
B - $950 Favorable
C - $375 Unfavorable
D - $375 Favorable
MCQ
Designer Desks (DD) provided the following information:
Budgeted Variable Manufacturing Overhead (VOH)
Budgeted Fixed Manufacturing Overhead (FOH)
$54,000
$162,000
Budgeted Production
18,000 units
Budgeted Direct Labor Hours (DLH)
27,000 hours
Budgeted DLH per Unit
1.5 DLH
Standard: VOH 1.5 DLH @ $2 per Hour
$3 per unit
Standard: FOH 1.5 DLH @ $6 per Hour
$9 per unit
Actual VOH
$68,250
Actual FOH
$148,000
Actual Production
Actual DLH
20,000 units
32,500
Based on the above information and assuming that DLH is a useful predictor of VOH, what is
DD's variable overhead spending variance?
A - $3,250 Unfavorable
B - $3,250 Favorable
C - $5,000 Unfavorable
D - $5,000 Favorable
MCQ
Designer Desks (DD) provided the following information:
Budgeted Variable Manufacturing Overhead (VOH)
Budgeted Fixed Manufacturing Overhead (FOH)
$54,000
$162,000
Budgeted Production
18,000 units
Budgeted Direct Labor Hours (DLH)
27,000 hours
Budgeted DLH per Unit
1.5 DLH
Standard: VOH 1.5 DLH @ $2 per Hour
$3 per unit
Standard: FOH 1.5 DLH @ $6 per Hour
$9 per unit
Actual VOH
$68,250
Actual FOH
$148,000
Actual Production
Actual DLH
20,000 units
32,500
Based on the above information and assuming that DLH is a useful predictor of VOH, what is
DD's variable overhead efficiency variance?
A - $3,250 Favorable
B - $3,250 Unfavorable
C - $5,000 Unfavorable
D - $5,000 Favorable
MCQ
Designer Desks (DD) provided the following information:
Budgeted Variable Manufacturing Overhead (VOH)
Budgeted Fixed Manufacturing Overhead (FOH)
$54,000
$162,000
Budgeted Production
18,000 units
Budgeted Direct Labor Hours (DLH)
27,000 hours
Budgeted DLH per Unit
1.5 DLH
Standard: VOH 1.5 DLH @ $2 per Hour
$3 per unit
Standard: FOH 1.5 DLH @ $6 per Hour
$9 per unit
Actual VOH
$68,250
Actual FOH
$148,000
Actual Production
Actual DLH
20,000 units
32,500
Based on the above information, what is DD's fixed overhead spending variance?
A - $18,000 Favorable
B - $18,000 Unfavorable
C - $14,000 Favorable
D - $14,000 Unfavorable
MCQ on sales variance
MCQ
Comfort Chairs (CC) is a manufacturer of reclining chairs. CC manufactures two different
models of chair, the classic and deluxe model. Below is CC's budget information and actual
results for last year.
Budget
Classic Chair Deluxe Chair
Expected Sales Volume 35,000 Chairs 20,000 Chairs
Standard Price per Chair
$375
$500
Actual
Classic Chair Deluxe Chair
Actual Sales Volume 34,000 Chairs 20,500 Chairs
Actual Price per Chair
$380
What is the sales price variance based on the above information?
$57,500 Favorable
$67,500 Favorable
$57,500 Unfavorable
$67,500 Unfavorable
$495
MCQ
Comfort Chairs (CC) is a manufacturer of reclining chairs. CC manufactures two different
models of chair, the classic and deluxe model. Below is CC's budget information and actual
results for last year.
Budget
Classic Chair Deluxe Chair
Expected Sales Volume 35,000 Chairs 20,000 Chairs
Standard Price per Chair
$375
$500
Actual
Classic Chair Deluxe Chair
Actual Sales Volume 34,000 Chairs 20,500 Chairs
Actual Price per Chair
$380
What is the sales price variance based on the above information?
$57,500 Favorable
$67,500 Favorable
$57,500 Unfavorable
$67,500 Unfavorable
$495
MCQ
• What is the sales volume variance based on the information given for
Comfort Chairs?
•
$125,000 Unfavorable
•
$125,000 Favorable
•
$67,500 Unfavorable
•
$67,500 Favorable
MCQ
Comfort Chairs (CC) is a manufacturer of reclining chairs. CC manufactures two different
models of chair, the classic and deluxe model. Below is CC's budget information and actual
results for last year.
Budget
Classic Chair Deluxe Chair
Expected Sales Volume
35,000 Chairs 20,000 Chairs
Standard Price per Chair
Standard Variable Cost
Standard Contribution Margin
Actual
Actual Sales Volume
Actual Price per Chair
Actual Variable Cost
Actual Contribution Margin
$375
$500
($200)
($300)
$175
$200
Classic Chair Deluxe Chair
34,000 Chairs 20,500 Chairs
$380
$495
($200)
($290)
$180
$205
What is the sales volume variance (measured in terms of contribution margin) based on the
above information?
$272,500 Unfavorable
$272,500 Favorable
$75,000 Unfavorable
$75,000 Favorable
MCQ
Fantastic Fixtures (FF) manufactures light fixtures for commercial buildings. FF manufactures
two different kinds of light fixtures, the small and large model. Below is FF's budget
information and actual results for last year.
Budget
Small Fixture Large Fixture
Expected Sales Volume
60,000 Fixtures 90,000 Fixtures 150,000 Fixtures
Standard Price per Fixture
$150
$300
Expected Mix Percentage
40%
60%
Actual
Actual Sales Volume
Total
Small Fixture Large Fixture
100%
Total
62,000 Fixtures 88,000 Fixtures 150,000 Fixtures
Actual Price per Fixture
Actual Mix Percentage
$160
$290
41.33%
58.67%
What is the sales mix variance based on the above information?
$0
$300,000 Unfavorable
$300,000 Favorable
Not enough information to calculate.
100%
MCQ
Fantastic Fixtures (FF) manufactures light fixtures for commercial buildings. FF manufactures
two different kinds of light fixtures, the small and large model. Below is FF's budget
information and actual results for last year.
Budget
Small Fixture Large Fixture
Expected Sales Volume
60,000 Fixtures 90,000 Fixtures 150,000 Fixtures
Standard Price per Fixture
$150
$300
Expected Mix Percentage
40%
60%
Actual
Actual Sales Volume
Actual Price per Fixture
Actual Mix Percentage
Small Fixture Large Fixture
100%
Total
62,000 Fixtures 88,000 Fixtures 150,000 Fixtures
$160
$290
41.33%
58.67%
What is the sales quantity variance based on the above information?
$300,000 Unfavorable
$300,000 Favorable
$260,000 Unfavorable
$0
Total
100%
MCQ
Which variance would be added to the flexible budget variance to
arrive at the total static budget variance
A. efficiency variance
B. price variance
C. sales mix variance
D. sales volume variance
MCQ
Combo Cy uses a standard cost system. Information for Raw material (RM)
for product #4 for the month of June is shown next:
Standard price per pound of RM = $1.6 Actual price = $1.55
Actual quantity purchased = 2,000 pounds; used= 1,900 pounds
Standard quantity= 1,800 pounds
What is the RM purchase price variance?
A. $90 favorable
B. $90 unfavorable
C. $100 favorable
D. $100 unfavorable