Cost Variance Analysis: Flexible Budget, Performance and References

This homework assignment presents a detailed cost variance analysis, comparing budgeted and actual financial data to evaluate performance. The solution includes calculations for sales revenue, direct costs (certificates, training booklets, etc.), variable overhead, and fixed overhead. It provides a flex...Read More

Answer A:
Particulars
Volume Budget
Profit Flexible Budget Volum
e
Actual
Results
Volume Rate Amount
Sales Revenue 1680 $604,800.00 2106 $360.0
0 $758,160.00 2106 $789,750.00
Direct costs
-Certificates 1680 $
33,600.00 2106 $
20.00
$
42,120.00 2106 $
60,232.00
-Training Booklets 1680 $
20,160.00 2106 $
12.00
$
25,272.00 2106 $
25,009.00
-Evaluation
Materials 1680 $
13,440.00 2106 $
8.00
$
16,848.00 2106 $
21,313.00
-T shirt 1680 $
25,200.00 2106 $
15.00
$
31,590.00 2106 $
49,280.00
-Instructor labor 7560 $
211,680.00 9477 $
28.00
$
265,356.00 9828 $
294,840.00
Variable
Overhead
-Petrol 9800 $
8,820.00 12285 $
0.90
$
11,056.50
$
14,040.00
-Advertising 280 $
16,800.00 351 $
60.00
$
21,060.00
$
16,848.00
-Indirect Materials 92400 $
18,480.00 115830 $
0.20
$
23,166.00
$
38,958.00
-Administration
cost 9800 $
38,556.00 12285 $
3.93
$
48,332.70
$
33,415.00
Total variable
costs $386,736.00 $484,801.20 $553,935.00
Total contribution
margin $218,064.00 ? ? $273,358.80 $235,815.00
Fixed Overhead
-Advertising $
12,000.00
$
12,000.00
$
10,000.00
-Rent $
9,000.00
$
9,000.00
$
18,000.00
-Insurance $
11,000.00
$
11,000.00
$
13,000.00
-Depreciation $
20,000.00
$
20,000.00
$
15,000.00
-Other $
10,000.00
$
10,000.00
$
9,000.00
Total fixed costs $ 62,000.00 $ 62,000.00 $ 65,000.00
Net Profit $211,358.80 $170,815.00

Answer B:
Certificate is the direct cost so here is need to apply cost variance formula:
Certificate cost price variance = (Actual price – Budgeted Price)* Standard units (Ward, 2012)
= (($60232/2106)-$20)*2106
Certificate cost price variance
(Actual price –
Budgeted Price)*
Standard units
$ 18,112.00
Where
Actual Price $ 28.60
Certificate cost volume/ quantity variance = (Actual quantity – Budgeted quantity)* Standard
price
= (2106-1680)*$20
Certificate cost volume/ quantity variance =
(Actual quantity –
Budgeted quantity)*
Standard price
$ 8,520.00
Answer C:
Direct labor efficiency variance = (Actual hours - Standard hours) x Standard rate
= (9828-9477)*$28
Direct labor efficiency variance
(Actual hours -
Standard hours) x
Standard rate
$ 9,828.00
Direct Labour Price Variance = (Actual rate - Standard rate) x Actual hours worked
= (($294840/9828)-$28) * 9828
Direct Labour Price Variance
(Actual rate -
Standard rate) x
Actual hours
worked

$ 19,656.00
Answer D:
Petrol variance overhead efficiency variance= Standard overhead rate x (Actual quantity -
Standard quantity)
= $0.90 * (12285-9800)
Petrol variance overhead efficiency variance
Standard
overhead rate x
(Actual quantity
- Standard
quantity)
$2236.50
Petrol variance overhead price variance= Actual quantity x (Actual overhead rate - standard
overhead rate)
=Actual quantity * Actual O/H rate – Actual Quantity * Standard O/H rate
= $14040 – (12285*$0.90)
= $2,983.50
Petrol variance overhead price variance
Actual quantity
x (Actual
overhead rate -
standard
overhead rate)
$2,983.50
(Zimmerman and Yahya-Zadeh, 2011)

References
Ward, K., 2012. Strategic management accounting. Routledge.
Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and
control. Issues in Accounting Education, 26(1), pp.258-259.