Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 31

Sales Price and Activity Variances

Dylan&Father operate a tax accounting practice with partners and staff members. Each billable hour of partner time has a $770 budgeted price and $364 budgeted variable cost. Each billable hour of staff time has a budgeted price of $182 and a budgeted variable cost of $98. This month, the partnership budget called for 5,100 billable partner-hours and 20,790 staff-hours. Actual results were as follows:

Partner revenue	$3,612 000	4,800 hours
Staff revenue	$3,738 000	20,400 hours

Required

Compute the sales price and activity variances for these data. Also compute the mix and quantity variances.

Step 1 of 6

D&F is a tax accounting practice firm having partners and staff members. The budgeted price per hour of partner time is $770 and budgeted variable cost is $364. The budgeted price per hour of staff member is $182 and budgeted variable cost is $98. The budgeted billable hour of partners for this month is of 5,100 partner’s hour and of staff members 20,790 billable hours.

The difference between actual cost and the flexible budget is the price variance as calculated below:

Flexible budget is the budgeted price multiplied by the actual billable hours.