Before the beginning of the month, XYZ Company prepares a budget. In the budget, the
Company plans to produce and sell 100 units for a selling price of $60 each. The only cost to
prepare the units is for yards of material. Each unit is budgeted to require 2 yards of material at a
cost of $10 per yard. After the end of the month, the following actual results were recorded:
Actual number of units sold 110 Actual sales revenue $6,710 Actual purchases (note all material
was used during month) 230yards @ $11/yard Based upon the above information, answer the
following questions: What is budgeted net income in planning budget?__________ Activity
Variance for materials (indicate amount and whether favorable or unfavorable)?__________
Revenue Variance (indicate amount and whether favorable or unfavorable)?__________
Spending Variance for materials (indicate amount and whether favorable or
unfavorable)?__________ Materials Price Variance (indicate amount and whether favorable or
unfavorable)?__________ Materials Quantity Variance (indicate amount and whether favorable
or unfavorable)?__________
Solution
Material price variance:- Actual quantity used (Standard price - Actual price)
230 (10 - 11)
230 (A)
(A) Denotes Unfavourable.
Material quantity variance = (Standard quantity for for Actual output - Actual quantity )
Standard Price
= ( 220 - 230) 10
= 100 (A)
(A) denotes unfavourable
Note:- Standard quantity for actual output = 110 * 2 = 220
Revenue Variance:-
= Actual quantity of output ( Acual selling price - Budgeted Selling Price)
= 110 ( 6710 / 110 - 60)
= 110 (61 - 60 ) = 110 (F)
(F) denotes Favourable.
Spending varience material for materials -
Total standard costs for actual output - Total actual costs
=(230 *10) -(230 * 11)
= 230 (A)

(A) denotes unfavourable
Activity variance materials =(Actual output - Standard output) Standard cost per unit
= (110 - 230 /2) 10
= 50 (F)
(F) denotes favourable.