case 10-1

Peter Huang Christina Kim Case 10-1: Variance Analysis Problems Part A 1. An variance analysis of actual profit for the month from budgeted using a variable standard cost system for the month of February is below (values are in 000’s): Actual

Budgeted

Variance

$781

$600

$181

Variable cost of sales 552

370

(182)

Cost of sales

552

370

(182)

Gross Profit

229

230

(1)

Selling Expense

57

50

(7)

Administrative

33

25

(8)

139

155

(16)

Sales

Expense Net Profit

2. An variance analysis of actual profit for the month from budgeted using a full-cost standard cost system for the month of February is below (values are in 000’s): Actual

Budgeted

Variance

Sales

781

600

181

Variable COS

552

370

(182)

Fixed Manu Costs

80

75

(5)

Cost of Sales

632

445

(187)

Gross Profit

149

155

(6)

Selling Expense

57

50

(7)

Administrative

33

25

(8)

59

80

(21)

expense Net Profit

3. Variance resulting from difference in market share and industry volume for February using variable costing is below: Product A

Product B

Product C

Total

833

500

1667

3000

12%

20%

6%

10%

100

100

100

300

600

650

1500

2750

Actual sales

120

130

150

400

Actual market

20%

20%

10%

15%

Budgeted Sales Volume Estimated Industry Volume Budgeted market share Budgeted volume (units) Actual Market Share Actual industry volume

share Variance due to market share Actual sales

120

130

150

400

Budgeted shares

72

130

90

292

Difference

48

0

60

108

Budgeted unit

.20

.90

1.2

10

0

72

82

600

650

1500

2750

833

500

1667

3000

Difference

(233)

150

(167)

(250)

Budgeted

12%

20%

6%

(28)

30

(10)

at actual volume

contribution Variance due to market share Variance due to industry volume Actual industry volume Budgeted industry volume

market share Difference *

budgeted Market share Unit

.20

.90

1.2

(5.59)

27

(12.02)

contribution Variance due to

9.38

industry volume

Part B 1. An variance analysis of actual profit for the month from budgeted using a variable standard cost system for the month of March is below (values are in 000’s): Actual

Budgeted

Variance

498

$600

(102)

Variable cost of sales 278

370

92

Cost of sales

278

370

92

Gross Profit

220

230

(10)

Selling Expense

45

50

5

Administrative

20

25

5

155

155

0

Sales

Expense Net Profit

2. An variance analysis of actual profit for the month from budgeted using a full-cost standard cost system for the month of March is below (values are in 000’s):

Actual

Budgeted

Variance

Sales

498

600

(102)

Variable COS

278

370

92

Fixed Manu Costs

70

75

5

Cost of Sales

348

445

97

Gross Profit

150

155

(5)

Selling Expense

45

50

5

Administrative

20

25

5

85

80

5

expense Net Profit

3. Variance resulting from difference in market share and industry volume for March using variable costing is below: Budgeted Sales

Product A

Product B

Product C

Total

833

500

1667

3000

12%

20%

6%

38%

100

100

100

300

Volume Estimated Industry Volume Budgeted market share Budgeted volume (units) Actual Market

Share Actual industry

500

600

1000

2100

Actual sales

90

70

80

240

Actual market

18%

12%

8%

11%

Actual sales

90

70

80

240

Budgeted shares

60

120

60

240

Difference

30

(50)

20

0

Budgeted unit

.20

.90

1.2

2.3

6

(45)

24

(15)

500

600

1000

2100

833

500

1667

3000

volume

share Variance due to market share

at actual volume

contribution Variance due to market share Variance due to industry volume Actual industry volume Budgeted

industry volume Difference

(333)

100

(667)

Budgeted

12%

20%

6%

(40)

20

(40)

.20

.90

1.2

(7.99)

18

(48.02)

(900)

market share Difference * budgeted Market share Unit contribution Variance due to

(38.02)

industry volume

An analysis of variance between actual and budget profits for January is below: ($000) Sales Cost of Sales Gross Profit Selling Expense R&D Expense Admin Expense Total Expense Net profit (loss) before taxes

Budgeted 2500 1620 880 250 300 120 670 210

Actual 2160 1580 580 290 250 110 650 (70)

Variance (340) 40 (300) (40) 50 10 20 (280)