29 Jul LEXI BELCHER PICKED UP THE MONTHLY REPORT THAT
Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled asher eyes went straight to the bottom line of the report and saw the favorable variance foroperating income, confirming her decision to push the workers to get those last 250 cases off theproduction line before the end of the month.But as she glanced over the rest of numbers, Lexi couldnt help but wonder if there were errors insome of the line items. She was puzzled how most of the operating expenses could be higher thanthe budget since she had worked hard to manage the production line to improve efficiency andreduce costs. Yet the report, shown below, showed a different story.ActualCases produced and sold Budget Variance 10,250 10,000 250 Favorable $1,947,500 $1,870,000 $77,500 Favorable Direct material 561,000 550,000 11,000 Direct labor 267,650 260,000 7,650 Variable manufacturing overhead 285,012 280,000 5,012 Variable selling expenses 93,130 90,000 3,130 Variable administrative expenses 41,740 40,000 1,740 Contribution margin 698,968 650,000 Fixed manufacturing overhead 111,000 110,000 69,500 70,000 500 Favorable 129,800 130,000 200 Favorable $388,668 $340,000 $48,668 Favorable Sales revenue Fixed selling expensesFixed administrative expensesOperating income UnfavorableUnfavorableUnfavorableUnfavorableUnfavorable 48,968 Favorable1,000 Unfavorable Lexi picked up the phone and called Irvin. Irvin, I dont get it. We beat the budgeted operatingincome for the month, but look at all the unfavorable variances on the operating costs. Can youhelp me understand whats going on? Let me look into it and Ill get back to you, Irvin replied.Irvin gathered the following additional information about the months performance.???? Direct materials purchased: 102,000 pounds at a total of $561,000Direct materials used: 102,000 poundsDirect labor hours worked: 26,500 at a total cost of $267,650Machine hours used: 40,950 Irvin also found the standard cost card for a case of product.StandardPrice StandardQuantity StandardCost Direct materials $5.5 per pound 10 pounds Direct labor $10 per DLH 2.60 DLH 26.00 Variable overhead $7 per MH 4 MH 28.00 $55 Fixed overhead $2.75 per MH 4 MH Total standard cost per case 11.00$120.00 Don’t show me this message again for the assignment (a-g)(a-b) Calculate the direct material price variance and direct material quantity variance for themonth. (If variance is zero, select “Not Applicable” and enter 0 for the amounts.)$Direct material price variance$Direct material quantityvariance (c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month.(Round answers to 0 decimal places, e.g. 1525. If variance is zero, select “NotApplicable” and enter 0 for the amounts.)$Direct labor rate variance$Direct labor efficiencyvariance (e-f) Calculate the variable overhead spending variance and variable overhead efficiency variancefor the month. (If variance is zero, select “Not Applicable” and enter 0 for the amounts.)$Variable overhead spending variance$Variable overhead efficiencyvariance (g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select”Not Applicable” and enter 0 for the amounts.)Fixed overhead spending variance $Calculate the direct material price variance and direct material quantity variance for the monthCalculate the direct labor rate variance and direct labor efficiency variance for the month.Calculate the variable overhead spending variance and variable overhead efficiency variance for the month.Calculate the fixed overhead spending variance for the month.
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