Variance Analysis problem for Zurich Chocolate Company
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The Zurich Chocolate Company uses standard costs and a flexible budget to control its manufacture of fine chocolates. The purchasing agent is responsible for material price variances, and the production manager is responsible for all other variances. Operating data for the past week are summarized as follows:
1. Finished units produced: 4,000 boxes of chocolates.
2. Direct materials: Purchased and used, 4,3000 pounds of chocolate @ 15.5 Swiss francs (SFR) per pound; standard price is 16 SFR per pound. Standard allowed per box produced, 1 pound.
3. Direct labor: Actual costs, 6,400 hours @ 30.5 SFR, or 195,200 SFR. Standard allowed per box produced, 1-1/2 hours. Standard price per direct-labor hour, 30 SFR.
4. Variable manufacturing overhead: Actual costs, 69,500 SFR. Budget formula is 10 SFR per standard direct-labor hour.
Compute the following:
1.
a. Materials purchase-price variance
b. Materials quantity variance
c. Direct-labor price variance
d. Direct-labor quantity variance
e. Variable manufacturing-overhead spending variance
f. Variable manufacturing-overhead efficiency variance
(Hint: For format, see the solution to the Summary Problem for Your Review, page 363.)
2.
a. What is the budget allowance for direct labor?
b. Would it be any different if production were 5,000 boxes?
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Solution Summary
A variance analysis for Zurich Chocolate Company is given. Materials purchase-price variance is computed.
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