Hersheys chocolate manufactures chocolate kisses. For the current month, the com
ID: 2478775 • Letter: H
Question
Hersheys chocolate manufactures chocolate kisses. For the current month, the company budgeted to purchase and use 3,000 kilograms of chocolate at $2.00 per kilograms to make 30,000 chocolate kisses. Actual purchases and usuage for the month were 2,900 kilograms at $1.98 per pound used to produce 28,000 chocolate kisses.
REQUIRED A-G
a) compute the flexible-budget variance.
b. Compute the sales volume variance
c) compute the price variance
d.) Compute the efficiency variance.
e.) how many kisses per kilogram were budgeted?
f.) how many kisses per kilogram were produced?
g.) provide 2 or more possible explanations for any difference in e & f and what or who may be responsible for differences.
Explanation / Answer
Actual
Flexible
Variance
Production
28,000
28,000
Materials
55,440
56,000
560(F)
Flexible
Budgeted
Variance
Production
28,000
30,000
Materials
56,000
60,000
4,000(F)
=(1.98 – 2.00) 2,900
= 58(F)
=(2,900 - 3,000/30,000*28000) 2
=200(U)
- Flexible budget variance
Actual
Flexible
Variance
Production
28,000
28,000
Materials
55,440
56,000
560(F)
- Sales volume variance
Flexible
Budgeted
Variance
Production
28,000
30,000
Materials
56,000
60,000
4,000(F)
- Price variance = (AR – AR) Actual usage
=(1.98 – 2.00) 2,900
= 58(F)
- Efficiency variance = (AQ – SQ ) SR
=(2,900 - 3,000/30,000*28000) 2
=200(U)
- 30,000/3,000 = 10 per kg
- 28,000/2,900 = 9.65 per kg
- The difference could be due to lack of efficiency , possible breakdowns , less units could be produced due to delay in receiving material orders .