RYT(aka
RotYourTeeth) Candy Company sells lollipops.Last year the company sold 10,000,000 lollipops...

Question

RYT(aka
RotYourTeeth) Candy Company sells lollipops.Last year the company sold 10,000,000 lollipops for
$1,000,000.The Variable Costs were $350,000 and the Net Profits were
$100,000
Administration has directed management to double profits
in the next year.Standard:

DM:Cost
$1 per pound
Each
unit requires 1/50 of a pound

DL:
Labor
costs are $10 per hour
Each
unit requires .0015 labor hoursActual:

DM: Cost
$1.50 per pound ,220,000 pounds
used

DL:Cost
$12 per hour, 16000
labor hours used

Determine the DL and DM
variances and provide explanations to the Board of Directors.

Robert · Accepted Answer

RYT  (aka RotYourTeeth) Candy Company sells lollipops. Last year the company sold 
10,000,000 lollipops for $1,000,000. The Variable Costs were $350,000 and the Net 
Profits were $100,000 Administration has directed management to double profits in the 
next year. 
Budget: 
DM:   Cost $1 per pound 
  Each unit requires 1/50 of a pound 
 
 DL:  Labor costs are $10 per hour 
  Each unit requires .0015 labor hours 
Actuals: 
DM:  Cost $1.50 per pound,  220,000 pounds used 
 DL: Cost $12 per hour,  16000 labor hours used   
Sales:  11,538,462 lollipops sold 
 
Determine the DL and DM variances and provide explanations to the Board of 
Directors. 
 
Solution: 
Direct materials (DM) variances: 
DM variance can be sub-divided into: 
(1) Direct materials price variance 
 (Actual price – Standard price)*Actual quantity 
 ($1.50 per pound - $1 per pound)*220,

RYT(aka RotYourTeeth) Candy Company sells lollipops.Last year the company sold 10,000,000 lollipops for $1,000,000.The Variable Costs were $350,000 and the Net Profits were $100,000 Administration has...

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