Renee’s Rings manufactures college rings. Two models are produced: The Spirit mo
ID: 2484227 • Letter: R
Question
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $570 and a standard variable cost of $270. The Chancellor model has a budgeted price of $1,270 and a standard variable cost of $470. At the beginning of the year, Renee estimated that she would sell 1,300 Chancellor rings and 8,700 Spirit rings. The actual results for the year showed that 1,700 Chancellor rings were sold for total revenues of $1,904,000. A total of 9,200 Spirit rings were sold for revenues of $5,474,000.
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
Quantity Variance for the year (Sales ) = (1700-1300)*1270 + (9200-8700)*570
= $508,000 + $285,000
= $793,000 (F)
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Total Quantity to be sold = 1300+8700
= 10,000 units
Ratio = 13:87
Total quantity actually sold = 1700+9200
= 10,900 units
Chancellor = 10,900*(13/100)
= 1417 units
Spirit = 10,900*(87/100)
= 9483 units
Mix Variance (Sales) = (Actual Mix Quantity - Standard Mix Quantity) x Standard Price
= (9483-8700)*570 + (1417-1300)*1270
= 594,900 (F)