Use the planning budget and actual performance data provided in the Case Study Template to calculate...

Question

Use the planning budget and actual performance data provided in the Case Study Template to calculate the following variances:Volume Variances for each line item in the Product Margin StatementFlexible Budget Variances for each line item in the Product Margin StatementMaterial Quantity Variance for each of the three products, and the Labor Efficiency Variance across all three products.Material Price Variance for each of the three products, and Labor Rate Variance across all three products.Using the Cast Study Template, state whether each variance is Favorable or Unfavorable.Explain which function within the organization (production, purchasing, or human relations) would be the responsible party for the Material Quantity Variances, Labor Efficiency Variance, Material Price Variances, and Labor Rate Variance.Provide plausible explanations that you could verify with each responsible party relating to the Material Quantity Variances, Labor Efficiency Variance, Material Price Variances, and Labor Rate Variance.

Pallavi · Accepted Answer

Material & Labor Price Var
	Annual Material Quantity and Labor Efficiency Variance
		"As If" Budget					Actual Costs					Material Price Variance
		Actual	Planned	"As If"			Actual	Actual	Actual			Actual	Unit	Material
	DIRECT MATERIALS	Quantity	Input	Material			Quantity	Input	Material			Quantity	Price	Price
		Used	Price	Cost			Used	Price	Cost			Used	Variance	Variance
		(in yards)	(per yard)	(Total $)			(in yards)	(per yard)	(Total $)			(in yards)	(per yard)	(Total $)	Fav (Unf)
	Blue Banner Material	11,673	$   60.00	$   700,380			11,673	$   58.80	$   686,372			11,673	$   1.20	$   14,008	Fav
	Multi-color Banner Material	2,550	$   28.00	$   71,400			2,550	$   28.70	$   73,185			2,550	$   (0.70)	$   (1,785)	(Unf)
	White Banner Material	10,227	$   40.00	$   409,080			10,227	$   40.50	$   414,194			10,227	$   (0.50)	$   (5,114)	(Unf)
		24450		$   1,180,860			24450		$   1,173,751			24450		$   7,109	Fav
		"As If" Budget					Actual Costs					Labor Rate Variance
		Actual	Planned	"As If"			Actual	Actual	Actual			Actual	Wage	Labor
	DIRECT LABOR	Hours	Labor	Labor			Hours	Labor	Labor			Hours	Rate	Rate
		Used	Rate	Cost			Used	Rate	Cost			Used	Variance	Variance
		(in hours)	(per hour)	(Total $)			(in hours)	(per hour)	(Total $)			(in hours)	(per hour)	(Total $)	Fav (Unf)
		6,174.65	$   40.00	$   246,986.00			6,174.65	$   38.00	$   234,637			6,174.65	$   2.00	$   12,349	Fav
		1st Qtr	2nd Qtr	3rd Qtr	4th Qtr
	Actual hours used	0.24	0.25	0.23	0.27
	Actual quantity
	Blue Banners - Actual	1018	2725	2880	5050
	Multi-color Banners - Actual	478	980	768	324
	White Banners - Actual	721	1184	2916	5406
	Total qty	2217	4889	6564	10780
	Total hours	532.08	1,222.25	1,509.72	2,910.60	6,174.65
Budgeted Income Statement
		Planning Budget Income Statement
			2020
			1st Qtr	2nd Qtr	3rd Qtr	4th Qtr
		Sales Units	2,120	4,760	6,660	10,400
		Sales Revenue	$   24,620	$   57,100	$   80,320	$   128,100
		Variable Expenses:
		Direct Materials	$   9,540	$   21,420	$   29,970	$   46,800
		Direct Labor	5,300	11,900	16,650	26,000
		Variable Manufacturing Overhead	795	1,785	2,498	3,900
		Variable S&A	4,770	10,710	14,985	23,400
		Total Variable Expense	$   20,405	$   45,815	$   64,103	$   100,100
		Contribution margin	$   4,215	$   11,285	$   16,218	$   28,000
		Fixed Expenses:
		Fixed Manufacturing Overhead	$   1,000	$   1,000	$   1,000	$   1,000
		Fixed S&A	1,500	1,500	1,500	1,500
		Total Fixed Expenses	$   2,500	$   2,500	$   2,500	$   2,500
		Operating Income	$   1,715	$   8,785	$   13,718	$   25,500
Volume Variance Analysis
		Flexible Budget Income Statement						Planning Budget Income Statement						Volume Variance Analysis
			2020						2020						2020
			1st Qtr	2nd Qtr	3rd Qtr	4th Qtr			1st Qtr	2nd Qtr	3rd Qtr	4th Qtr			1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Q1 U/F	Q2 U/F	Q3 U/F	Q4 U/F
		Sales Units	2,217	4,889	6,564	10,780		Sales Units	2120	4760	6660	10400		Sales Units	97	129	(96)	380	F	F	U	F
		Sales Revenue	$   25,826	$   59,575	$   77,736	$   132,078		Sales Revenue	24,620	57,100	80,320	128,100		Sales Revenue	$   1,206	$   2,475	$   (2,584)	$   3,978	F	F	U	F
		Variable Expenses:						Variable Expenses:						Variable Expenses:
		Direct Materials	$   9,977	$   22,001	$   29,538	$   48,510		Direct Materials	$   9,540	$   21,420	$   29,970	$   46,800		Direct Materials	$   (437)	$   (581)	$   432	$   (1,710)	U	U	F	U
		Direct Labor	5,543	12,223	16,410	26,950		Direct Labor	5,300	11,900	16,650	26,000		Direct Labor	(243)	(323)	240	(950)	U	U	F	U
		Variable Manufacturing Overhead	3,326	7,334	9,846	16,170		Variable Manufacturing Overhead	3,180	7,140	9,990	15,

Use the planning budget and actual performance data provided in the Case Study Template to calculate the following variances: Volume Variances for each line item in the Product Margin Statement...

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