Peter Huang

Christina Kim
Case 10-1: Variance Analysis Problems
Part A
1. An variance analysis of actual profit for the month from budgeted using a variable
standard cost system for the month of February is below (values are in 000s):
Actual Budgeted Variance
Sales $781 $600 $181
Variable cost of sales 552 370 (182)
Cost of sales 552 370 (182)
Gross Profit 229 230 (1)
Selling Expense 57 50 (7)
Administrative
Expense
33 25 (8)
Net Profit 139 155 (16)

2. An variance analysis of actual profit for the month from budgeted using a full-cost
standard cost system for the month of February is below (values are in 000s):
Actual Budgeted Variance
Sales 781 600 181
Variable COS 552 370 (182)
Fixed Manu Costs 80 75 (5)
Cost of Sales 632 445 (187)
Gross Profit 149 155 (6)
Selling Expense 57 50 (7)
Administrative
expense
33 25 (8)
Net Profit 59 80 (21)

3. Variance resulting from difference in market share and industry volume for February
using variable costing is below:
Budgeted Sales
Volume
Product A Product B Product C Total
Estimated
Industry
Volume
833 500 1667 3000
Budgeted
market share
12% 20% 6% 10%
Budgeted
volume (units)
100 100 100 300
Actual Market
Share

Actual industry
volume
600 650 1500 2750
Actual sales 120 130 150 400
Actual market 20% 20% 10% 15%
share
Variance due
to market
share

Actual sales 120 130 150 400
Budgeted shares
at actual volume
72 130 90 292
Difference 48 0 60 108
Budgeted unit
contribution
.20 .90 1.2
Variance due to
market share
10 0 72 82
Variance due
to industry
volume

Actual industry
volume
600 650 1500 2750
Budgeted
industry volume
833 500 1667 3000
Difference (233) 150 (167) (250)
Budgeted
market share
12% 20% 6%
Difference * (28) 30 (10)
budgeted
Market share
Unit
contribution
.20 .90 1.2
Variance due to
industry volume
(5.59) 27 (12.02) 9.38


Part B
1. An variance analysis of actual profit for the month from budgeted using a variable
standard cost system for the month of March is below (values are in 000s):
Actual Budgeted Variance
Sales 498 $600 (102)
Variable cost of sales 278 370 92
Cost of sales 278 370 92
Gross Profit 220 230 (10)
Selling Expense 45 50 5
Administrative
Expense
20 25 5
Net Profit 155 155 0

2. An variance analysis of actual profit for the month from budgeted using a full-cost
standard cost system for the month of March is below (values are in 000s):
Actual Budgeted Variance
Sales 498 600 (102)
Variable COS 278 370 92
Fixed Manu Costs 70 75 5
Cost of Sales 348 445 97
Gross Profit 150 155 (5)
Selling Expense 45 50 5
Administrative
expense
20 25 5
Net Profit 85 80 5

3. Variance resulting from difference in market share and industry volume for March using
variable costing is below:
Budgeted Sales
Volume
Product A Product B Product C Total
Estimated
Industry
Volume
833 500 1667 3000
Budgeted
market share
12% 20% 6% 38%
Budgeted
volume (units)
100 100 100 300
Actual Market
Share
Actual industry
volume
500 600 1000 2100
Actual sales 90 70 80 240
Actual market
share
18% 12% 8% 11%
Variance due
to market
share

Actual sales 90 70 80 240
Budgeted shares
at actual volume
60 120 60 240
Difference 30 (50) 20 0
Budgeted unit
contribution
.20 .90 1.2 2.3
Variance due to
market share
6 (45) 24 (15)
Variance due
to industry
volume

Actual industry
volume
500 600 1000 2100
Budgeted 833 500 1667 3000
industry volume
Difference (333) 100 (667) (900)
Budgeted
market share
12% 20% 6%
Difference *
budgeted
Market share
(40) 20 (40)
Unit
contribution
.20 .90 1.2
Variance due to
industry volume
(7.99) 18 (48.02) (38.02)

An analysis of variance between actual and budget profits for January is below:
($000) Budgeted Actual Variance
Sales 2500 2160 (340)
Cost of Sales 1620 1580 40
Gross Profit 880 580 (300)
Selling Expense 250 290 (40)
R&D Expense 300 250 50
Admin Expense 120 110 10
Total Expense 670 650 20
Net profit (loss)
before taxes
210 (70) (280)