Management Accounting

Variance Project,I need accounting professional who can help me in this

The variance analysis project is absolutely a tough & tricky question. Here are some things to help you

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get going in the right direction:

1. Variance calculations

• Setup / format – I suggest showing separate columns for AQ, AP, SQ, SP, etc. and also separate

rows for amateur and professional. A potential set up would look like this:

• Direct materials – in point #4, you’re told the total DM variance is \$5,040, unfavourable. In

point #3, you’re also told that “direct materials were purchased at the budgeted price of \$28 per

kg”. From this you can deduce that AP = SP, and there would be no price variance on materials.

Your entire \$5,040 unfavourable materials variance relates to quantity – but you need to figure

out whether that was the amateur or professional model.

• Direct labour – AR and SR are the same for professional and amateur models. There is a

difference between AR and SR, however, so you will see a labour rate variance for. You will also

see an efficiency variance, but only pertaining to one of the two models.

o Check figures – rate variance (total for amateur & pro) = \$6,120 unfavourable. Efficiency

variance (total) = \$5,040 favourable.

• Variable overhead – similar to labour, there will be an efficiency variance, but only for one

model. In point #8, you are given the total VOH variance of \$16,344, favourable. Once you solve

the efficiency variance, you can plug the amount in for rate variance that will give you that total

favourable variance. Then you will need to work backwards to solve the actual rate of variable

overhead (hint: it is the same for both amateur and professional) .

o Check figures – spending variance (total for amateur & pro) = \$9,792 favourable.

Efficiency variance (total) = \$6,552 favourable.

Materials variances

AQ AP AQ SP SQ SP

Amateur model xx kg \$xx xx kg \$xx xx kg \$xx

Amateur model sub total \$XXXX \$XXXX \$XXXX

Professional model xx kg \$xx xx kg \$xx xx kg \$xx

Professional model subtotal\$XXXX \$XXXX \$XXXX

Total amateur and pro \$XXXXX \$XXXXX \$XXXXX

Price variance \$XXX Quantity variance \$XXX

U / F U / F

Total direct materials variance \$XXX U / F

2. Variance analysis – don’t forget to comment on the variances

3. Standard cost cards

• You will need to know the SQI/SHI and SP/SR for both amateur & professional models. The

standard cost card includes direct materials, direct labour, variable manufacturing overhead.

You will have calculated each of these components in step 1, so you this stage will be just to

accumulate the data together. An example format:

Standard Cost Card – Amateur Model Standard Standard Standard

Production costs per unit: Quantity Price Cost

Direct material -\$

Direct labour -\$

Total production cost per unit -\$

Standard Cost Card – Professional Model Standard Standard Standard

Production costs per unit: Quantity Price Cost
Direct material -\$
Direct labour -\$
Total production cost per unit -\$

Adapted from Thinking Analytically 11-1, Brewer et. al., 2017 page 742 – 744

Brewer, Garrison, Noreen, Kalagnanam, Vaidyanathan (2017). Introduction to Managerial Accounting (5th Canadian
edition), USA: McGraw-Hill Ryerson.

Chapter 11 Variance Analysis Project
Winter 2020

This project is to be completed in Excel (all parts) and submitted through the
Moodle dropbox by 11:55 PM on Wednesday April 01, 2020.

The Case (40 marks):

Linda Trueblood, president of ProSkate, was staring at the most recent quarterly
performance report and was not pleased. “How can this be possible?” she asked of
her senior management team. “I thought the market for our products had
improved and that all we needed to do was maintain our budgeted market share.
But this report tells me that our profits are below expectations, and I do not
understand that.” She then turned her attention to the manufacturing manager,
wondering what story was going to emerge from his side. The performance report
she was reviewing contained the following information:

Sales

\$2,880,000

Less: Cost of goods sold

Variable \$617,256

Fixed 992,750 1,610,006

Gross margin

\$1,269,994

Variable \$172,800

Fixed 450,000 622,800

Operating income

\$ 647,194

Other information is as follows:

a. Overall profit variance was \$107,294 U.
b. Sales revenues were \$144,000 lower than the static budgeted amount.
c. Contribution margin was \$105,144 lower than the budgeted amount.
d. Actual market share was about 0.535% lower than the budgeted 10%.

ProSkate manufactures two types of skates: professional and amateur. The

Adapted from Thinking Analytically 11-1, Brewer et. al., 2017 page 742 – 744
Brewer, Garrison, Noreen, Kalagnanam, Vaidyanathan (2017). Introduction to Managerial Accounting (5th Canadian
edition), USA: McGraw-Hill Ryerson.

1. The company sold 7,200 pairs of professional skates and 18,000 pairs of
amateur skates during the quarter, compared with the budgeted quantities
of 8,000 and 17,600, respectively.

2. Budgeted unit contribution margins for the professional and amateur

models were \$185.55 and \$40.38, respectively.

3. Direct materials were purchased at the budgeted price of \$28 per kilogram;
all materials purchased were used during the period. Direct labour was paid
\$0.50 per hour higher than the budgeted amount of \$14 per hour for both
types of skates.

4. Total direct materials variance amounted to \$5,040 (unfavourable).

5. Direct materials and direct labour used for the amateur model were the
same as the standard quantity and hours (0.28 kilograms per unit and 0.40
hours per unit, respectively). Standard quantity and hours per unit of the
professional model were 0.40 kilograms and 0.75 hours.

6. The total direct materials and direct labour used for the professional model
during the quarter were 3,060 kilograms and 5,040 hours, respectively.

7. The predetermined allocation rate for variable overhead was 130% of the
standard direct labour cost;

Required:

Adapted from Thinking Analytically 11-1, Brewer et. al., 2017 page 742 – 744
Brewer, Garrison, Noreen, Kalagnanam, Vaidyanathan (2017). Introduction to Managerial Accounting (5th Canadian
edition), USA: McGraw-Hill Ryerson.

1. Compute the following total variances in Excel (inclusive of the professional
and amateur skates) (12 marks):

i) Direct materials price variance (2 marks)
ii) Direct materials quantity variance (2marks)
iii) Direct labour rate variance (2 marks)
iv) Direct labour efficiency variance (2 marks)
v) Variable overhead rate variance (2 marks)
vi) Variable overhead efficiency variance (2 marks)

You may use the variance tree method or the equation method.
Be sure to label each of the variances as favourable (F) or unfavourable (U).

2. Suggest at least two possible reasons for each of the variances above. (15
marks)

3. Prepare the standard cost cards for both the professional skate model, and
the amateur skate model. Standard cost cards should include the direct
materials, direct labour, and variable manufacturing overhead per unit. You
should also have the standard quantity/hours per unit, and the standard
price/rate per unit, multiplied by each other to get the standard cost per
unit for the amateur model and professional model. (13 marks)

The suggested format in Excel is to have 3 tabs (one for Required #1 and 2 as they
are linked, one for Required #3, and one for Required #4).

Hints

– Start with the variance analysis – complete what information you know from
above, and determine what you still need to complete the analysis, then
attempt to calculate or find it

Cheating and plagiarism

This is an individual assignment. You are to prepare the variance analysis project

Adapted from Thinking Analytically 11-1, Brewer et. al., 2017 page 742 – 744
Brewer, Garrison, Noreen, Kalagnanam, Vaidyanathan (2017). Introduction to Managerial Accounting (5th Canadian
edition), USA: McGraw-Hill Ryerson.

should not be someone else’s or downloaded from anywhere on the internet.

ALL instances of cheating or plagiarism will be reported to the Dean’s office and

may result in suspension from the Business Program.

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