Question

For CVS Brand Products 2017 year end, the following budgeted and actual results are available for...

For CVS Brand Products 2017 year end, the following budgeted and actual results are available for the bagged popcorn department:

Budget

Actual

Bags of popcorn sold

10,000

13,000

Selling price

$5

$4.75

Variable costs per bag

$2

$1.75

Fixed costs

$8,000

$6,500

Prepare the Static, Flexible, and Actual budgets for the popcorn department for 2017. Determine the static budget variance, the flexible budget variance, the total sales volume variance, indicating (F) favorable or (U) unfavorable for each line item in the budget.

Specifically for direct labor hours, cost of $1.20 per bag was budgeted, but $0.95 was the actual cost per bag. Break down the price variance and efficiency variances for direct labor.

Homework Answers

Answer #1
(1) (2) = (1) - (3) (3) (4) = (3) - (5) (5) (6) = (1) - (5)
Actual Results Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget Static Budget Variance
Units sold 13000 0 13000 3000 F 10000 3000 F
Sales revenue 61750 3250 U 65000 15000 F 50000 11750 F
Variable costs 22750 3250 F 26000 6000 U 20000 2750 U
Contribution margin 39000 0 None 39000 9000 F 30000 9000 F
Fixed costs 6500 1500 F 8000 0 None 8000 1500 F
Net operating income 32500 1500 F 31000 9000 F 22000 10500 F

Direct labor price variance = (AQ x AP) - (AQ x SP) = (13000 x $0.95) - (13000 x $1.20) = $12350 - $15600 = $3250 F

Direct labor efficiency variance = (AQ x SP) - (SQ x SP) = (13000 x $1.20) - (10000 x $1.20) = $15600 - $12000 = $3600 U

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