Lily Painting Service specializes in painting tall office buildings. During a recent month, the company worked on three painting projects (the Arrow Building, the Besler Building and the Cartrwright Building). The company is interested in controlling the materials costs, namely the paint, used for these painting contracts. In order to provide management with useful cost control information, the company uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly purchased poor-quality paint for the Arrow Building project. The Besler Building project, however, received higher-than-standard-quality paint that was on sale. The Cartwright Building project received standard-quality paint. However, the price had increased and a new employee was used to paint the building. Shown below are quantity and cost data for each project. Project Arrow Building Besler Building (a) Cartwright Building 4,540 Total variance ✓ Your answer is correct. Project Arrow Building Besler Building Quantity Cartwright Building Actual 3,720 gallons 3,820 Total price variance Costs $275,280 $290,320 4,000 $363.200 4,220 Prepare a variance report for the purchasing department with the following columns: (1) Project. (2) Actual Gallons Purchased, (3) Actual Price, (4) Standard Price. (5) Price Variance, and (6) Explanation. Actual Gallons Purchased 3,720 3,820 Costs 3,500 gallons $273,000 $312.000 $329,160 4,540 $ Standard $ $ Quantity Actual Price 74 76 80 $ $ Total $ Variance $2.280 U 21.680 F 34,040 U $14,640 U Lily Painting Service Variance Report - Purchasing Department For the month ended XX Standard Price 78 78 78 $ 14,880 7,640 9,080 13,440 Price Variance Favorable Favorable Unfavorable Favorable v V Explanation Poor Quality Paint Purchased/Cheaper ✓ High Quality Paint Purchased on sale Std. Quality Purchase/Price increased V
Lily Painting Service specializes in painting tall office buildings. During a recent month, the company worked on three painting projects (the Arrow Building, the Besler Building and the Cartrwright Building). The company is interested in controlling the materials costs, namely the paint, used for these painting contracts. In order to provide management with useful cost control information, the company uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly purchased poor-quality paint for the Arrow Building project. The Besler Building project, however, received higher-than-standard-quality paint that was on sale. The Cartwright Building project received standard-quality paint. However, the price had increased and a new employee was used to paint the building. Shown below are quantity and cost data for each project. Project Arrow Building Besler Building (a) Cartwright Building 4,540 Total variance ✓ Your answer is correct. Project Arrow Building Besler Building Quantity Cartwright Building Actual 3,720 gallons 3,820 Total price variance Costs $275,280 $290,320 4,000 $363.200 4,220 Prepare a variance report for the purchasing department with the following columns: (1) Project. (2) Actual Gallons Purchased, (3) Actual Price, (4) Standard Price. (5) Price Variance, and (6) Explanation. Actual Gallons Purchased 3,720 3,820 Costs 3,500 gallons $273,000 $312.000 $329,160 4,540 $ Standard $ $ Quantity Actual Price 74 76 80 $ $ Total $ Variance $2.280 U 21.680 F 34,040 U $14,640 U Lily Painting Service Variance Report - Purchasing Department For the month ended XX Standard Price 78 78 78 $ 14,880 7,640 9,080 13,440 Price Variance Favorable Favorable Unfavorable Favorable v V Explanation Poor Quality Paint Purchased/Cheaper ✓ High Quality Paint Purchased on sale Std. Quality Purchase/Price increased V
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Question
Transcribed Image Text:(b)
Prepare a variance report for the production department with the following columns: (1) Project, (2) Actual Gallons, (3) Standard Gallons, (4) Standard Price, (5) Quantity Variance, and (6) Explanation.
Project
Arrow Building
Besler Building
Cartwright Building
Total quantity variance
Actual
Gallons
Standard
Gallons
$
tA
$
$
Lily Painting Service
Variance Report - Production Department
For the month ended XX
Standard
Price
$
$
Quantity
Variance
Explanation
>
>
Transcribed Image Text:Lily Painting Service specializes in painting tall office buildings. During a recent month, the company worked on three painting projects (the Arrow Building, the Besler Building and the Cartrwright Building). The company is interested in controlling the materials costs, namely the paint, used for these painting contracts.
In order to provide management with useful cost control information, the company uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly purchased poor-quality paint for the Arrow Building project. The Besler Building project, however, received higher-than-standard-quality paint that was on
sale. The Cartwright Building project received standard-quality paint. However, the price had increased and a new employee was used to paint the building.
Shown below are quantity and cost data for each project.
Project
Arrow Building
Costs
3,720 gallons $275,280 3,500 gallons $273,000
bring
$290,320 4,000
$363,200 4,220
Besler Building
Total variance
Cartwright Building 4,540
(a)
Your answer is correct.
Project
Arrow Building
Besler Building
Quantity
3,820
Cartwright Building
Actual
Total price variance
Actual
Gallons
Purchased
3,720
3,820
4,540
$
Standard
Prepare a variance report for the purchasing department with the following columns: (1) Project, (2) Actual Gallons Purchased, (3) Actual Price, (4) Standard Price, (5) Price Variance, and (6) Explanation.
$
$
Quantity
Costs
Actual
Price
$312,000
$329,160
74
76
80
Total
$
$
Variance
$2,280 U
21,680 F
34,040 U
$14,640 U
Lily Painting Service
Variance Report - Purchasing Department
For the month ended XX
Standard
Price
78
78
78
$
$
14,880
7,640
9,080
13,440
Price
Variance
Favorable
Favorable
Unfavorable
Favorable
Explanation
Poor Quality Paint Purchased/Cheaper
High Quality Paint Purchased on sale
Std. Quality Purchase/Price increased
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