Renee’s Rings manufactures college rings. Two models are produced: The Spirit mo
ID: 2498299 • Letter: R
Question
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $590 and a standard variable cost of $290. The Chancellor model has a budgeted price of $1,290 and a standard variable cost of $490. At the beginning of the year, Renee estimated that she would sell 1,100 Chancellor rings and 8,900 Spirit rings. The actual results for the year showed that 1,500 Chancellor rings were sold for total revenues of $1,710,000. A total of 9,600 Spirit rings were sold for revenues of $5,904,000.
(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
Actual Price Per Chancellor Ring (CR) = 1710000/1500 = 1140
Actual Price Per Spirit Ring (SR) = 5904000/9600 = 615
Total Sales Variance CR = 1710000 - (1100*1290) = 291000 F
Sale Price Variance CR = 1500 * ( 1140 - 1290 ) = -225000 U
Sales Volume Variance CR = 1290 * ( 1500-1100) = 516000 F
Total Sales Variance SR = 5904000 - (8900*590) = 653000 F
Sale Price Variance SR = 9600 * ( 615 - 590 ) = 240000 F
Sales Volume Variance SR = 590 * ( 9600-8900) = 413000 F
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Sales Mix Variance = (9600+1500)* [(1500*1290 + 9600*590)/(9600+1500) - (1100*1290 + 8900*590)/(8900+1100)]
= 11100 * ( 684.59 - 667 ) = 195249 F
Quantity Variance = [(1100*1290 + 8900*590)/(8900+1100)] * ( 11100 - 10000)
= 733700 F