Case 21.1 Campar Industries, Inc.
This case is about variance analysis. The purpose of this case is to allow you to break down several different types of variance that might occur in a business, including:
•A margin variance caused by differences in price and volume
•A combination of volume, product mix, and margin variance.
•A materials mix variance
•A breakdown of variance effects on an income statement
Please note that simply reporting the numbers is not an adequate solution; you have to explain how these different types of variance affect the whole firm. In addition,
•You need to compare how the different divisions performed.
•You need to clearly state how the firm performed as a whole.
Campar Industries, Inc.
Campar Industries, Inc., was a multidivisional firm whose several divisions competed in different countries. This case deals with variance analysis problems in several of the divisions.
ALPHA DIVISION
In its annual profit budget, Alpha Division budgeted product A's sales volume at 24,000 units. Product A's budgeted price was $72 per unit; its standard cost was $43 per unit. Actual sales of product A turned out to be $1,658,250 for a volume of 22,000 units.
Question
Determine Alpha Division's gross margin variances.
(Anthony 645)
Anthony. Accounting: Texts and Cases, 13th Edition. McGraw-Hill Learning Solutions, 05/2010. VitalBook file.
BETA DIVISION
Beta Division makes three products. Last month's budgeted and actual sales and margins for these products were as follows:
Anthony 645)
Anthony. Accounting: Texts and Cases, 13th Edition. McGraw-Hill Learning Solutions, 05/2010. VitalBook file.
Question
Determine the gross margin mix, selling price, and sales volume variances. Calculate the net gross margin variance directly; then, as a check, see if it equals the sum of the three variance components you calculated individually.
GAMMA DIVISION
Gamma Division makes a product for which the standard raw materials cost per 100 pounds of finished product is shown below:
Anthony 645)
Anthony. Accounting: Texts and Cases, 13th Edition. McGraw-Hill Learning Solutions, 05/2010. VitalBook file.
Because materials were not supposed to be spoiled during production, these standards included no waste allowance.
During June, actual raw materials usage and costs were:
Question
Calculate the raw materials variances for June, referring back to Chapter 20 if necessary. Note: This problem contains a raw materials mix variance, analogous to the gross margin mix variance described in this chapter.
DELTA DIVISION
Delta Division makes two products, A and B. Both products use the same raw materials and are produced in the same factory by the same workforce. In preparing its annual statement of budgeted gross margin, Delta's management used the following assumptions:
Anthony 645)
Anthony. Accounting: Texts and Cases, 13th Edition. McGraw-Hill Learning Solutions, 05/2010. VitalBook file.
The year's actual results were as follows:
1. 1,750 units of A were sold for a total of $533,750.
2. 3,250 units of B were sold for a total of $601,250.
3. Production totaled 1,800 units of A and 3,300 units of B.
4. 180,000 pounds of raw materials were purchased and used; their total cost was $330,480.
5. 9,450 hours of direct labor were worked at a total cost of $233,880.
6. Actual overhead costs were $320,000.
Questions
1. Do as detailed an analysis of variances as the data given permit.
2. Prepare a summary statement for presentation to Delta's top management showing the year's budgeted and actual gross margin and an explanation of the difference between them.