Renee’s Rings manufactures college rings. Two models are produced: The Spirit mo
ID: 2474382 • Letter: R
Question
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $650 and a standard variable cost of $350. The Chancellor model has a budgeted price of $1,350 and a standard variable cost of $550. At the beginning of the year, Renee estimated that she would sell 1,800 Chancellor rings and 8,200 Spirit rings. The actual results for the year showed that 1,400 Chancellor rings were sold for total revenues of $1,680,000. A total of 6,900 Spirit rings were sold for revenues of $4,657,500.
Compute the activity variance for Renee’s Rings for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations.)
Compute the mix and quantity variances for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations.)
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $650 and a standard variable cost of $350. The Chancellor model has a budgeted price of $1,350 and a standard variable cost of $550. At the beginning of the year, Renee estimated that she would sell 1,800 Chancellor rings and 8,200 Spirit rings. The actual results for the year showed that 1,400 Chancellor rings were sold for total revenues of $1,680,000. A total of 6,900 Spirit rings were sold for revenues of $4,657,500.
Explanation / Answer
Flexible Budget Mater budget Variance 1400*(650-350) 420000 1800*(650-350) 540000 6900*(1350-550) 5520000 8200*(1350-550) 6560000 Total 5940000 Total 7100000 Actvity Variance =710000-5940000=1160000 Un favourable Flexible Budget ASQ*(SP-SV) 1400*(650-350) 420000 8300*(1800/(1800+8200))*(650-350) 448200 6900*(1350-550) 5520000 (8300*(8200/(1800+8200)))*(650-350) 2041800 Total 5940000 2490000 Mix Variance =2490000-594000 =3450000 F ASQ*(SP-SV) Mater budget Variance 8300*(1800/(1800+8200))*(650-350) 448200 1800*(650-350) 540000 (8300*(8200/(1800+8200)))*(650-350) 2041800 8200*(1350-550) 6560000 Total 2490000 Total 7100000 Quantity variance =7100000-2490000=UF 4610000