Renee’s Rings manufactures college rings. Two models are produced: The Spirit mo
ID: 2484171 • Letter: R
Question
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $530 and a standard variable cost of $230. The Chancellor model has a budgeted price of $1,230 and a standard variable cost of $430. At the beginning of the year, Renee estimated that she would sell 1,700 Chancellor rings and 8,300 Spirit rings. The actual results for the year showed that 2,100 Chancellor rings were sold for total revenues of $2,268,000. A total of 9,400 Spirit rings were sold for revenues of $5,217,000.
Required:
(a) 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.)
(b) 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.)
Explanation / Answer
Answer Sale volume Variance = (AUS-BUS)*Std profit per unit Sale volume Variance for Chancellor rings = (2100-1700)*800 = 320000 F Sale volume Variance for Spirit rings = (9400-8300)*300 = 330000 F Add the variance of each product = 320000+330000 = 650000 F Answer 2 Standard Mix ratio Chancellor 1700 and spirit 8300 Chancellor 17% and Spirit 83% Total Sale during the period Chancellor 2100 +Spirit 9400 = 11500 Unit Sales of Standard Mix Chancellor = 11500*17% = 1955 Spirit = 11500*83% = 9545 Diff erence in actual sales vs standard sales Chancellor Spirit Actual Sales 2100 9400 Standard sales 1955 9545 Difference 145 -145 145 F 145 U Standard Profit per Unit Chancellor Spirit Sale price 1230 530 Variable cost 430 230 Std Profit Per unit 800 300 Varaince 116000 (43,500) Sales Mix Variance = 116000-43500 72,500 Favourable