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Chapter 23: Q6RQ (page 1305)
Question: What are the two components of the static budget variance? How are they calculated?
Answer
Static budget variance is calculated by summing up the sales volume and flexible budget variance.
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Calculating flexible budget variances
Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.
GRANT, INC. | |||||
Flexible Budget Performance Report (partial) | |||||
For the Month Ended April 30, 2018 | |||||
| ActualResults | Flexible Budget Variance | Flexible Budget | |||
| Units | 9,000 | (a) | 9,000 | ||
Sales Revenue | \(126,000 | (b) | (c) | \)108,000 | |
Variable Costs | \(52,300 | (d) | (e) | \)50,300 | |
Contribution Margin | \(73,700 | (f) | (g) | \)57,700 | |
Fixed Costs | \(16,100 | (h) | (i) | \)14,900 | |
Operating Income | \(57,600 | (j) | (k) | \)42,800 | |
In 75 words or fewer, explain what a cost variance is and describe its potential causes.
McCarthy Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018. The 2018 revenue and cost information for McCarthy follows:
Sales Revenue \( 1,300,000
Cost of Goods Sold (at standard) 196,800
Direct materials cost variance 7,150 F
Direct materials efficiency variance 5,950 U
Direct labor cost variance 400 U
Direct labor efficiency variance 530 F
Variable overhead cost variance 650 U
Variable overhead efficiency variance 360 F
Fixed overhead cost variance 2,350 U
Fixed overhead volume variance 4,410 U
Assume each fender produced was sold for the standard price of \)65, and total selling and administrative costs were $250,000. Prepare a standard cost income statement for 2018 for McCarthy Fender
What is a variance?
Martin, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.5 hours per glass, at a cost of \(18 per hour. The actual results for one month’s production of 6,500 glasses were 0.2 hours per glass, at a cost of \)11 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance.
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