Peterborough Food produces a wide range of breakfast cereal foods. Its granola products are two of its most important product lines. Because of the complexity of the granola production process, the manufacturing area in the plant that makes these two product lines is separated from the rest of the plant and is treated as a separate cost center. Exhibit 10-34 presents the activity and cost data for this cost center for the most recent quarter. The plan data in Exhibit 10-34 reflect the master budget targets for the quarter. The factory accountant estimates that, with the increased production in line 1, the labor-related product-sustaining costs and the other product-sustaining costs for line 1 should increase by $20,000 and $100,000, respectively. The factory accountant also indicates that the decreased production in line 2 would require several quarters to be reflected in lower product-sustaining costs. The factory accountant indicated that the labor-related business-sustaining costs and the other business-sustaining costs should increase by $0 and $140,000, respectively, given the net increase in production.

Required

Prepare a second-level and third-level variance analysis of costs for the granola line cost center. In your analysis, group costs into unit-related, batch-related, product-sustaining, and business sustainingcosts.

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TOTAL TOTAL TOTAL TOTAL LINE 2 LINE 1 LINE 1 LINE 2 LINE 1 LINE 1 LINE 2 LINE 2 TOTAL TOTAL PLAN ACTUAL PLAN ACTUAL PLAN ACTUAL PLAN ACTUAL PLAN ACTUAL Number of boxes 1,175,000 945,000 945,000 1,200,000 Number of batches 189 200 235 210 Units per batch 5,000 5,000 4,500 6,000 Unit-related costs: Materials 500 515 350 375 Grams per box Cost per gram Packaging Units per box S0,0030 S0.0027 $0.0050 $0.0055 s2,056,250 $1,949,062 $3,473,750 $3,617,662 $1,417,500 $1,668,600 1.0000 1.0405 1.0600 1.0000 $0.0380 S42,525 Cost per unit Labor S0.0450 S0.0420 S0.0410 $53,424 S44,650 $40,314 S87,175 $93,738 Hours per box Cost per hour 0.013 0.011 0.010 0.009 $221,130 $18.25 $18.00 $18.25 $240,900 $190,350 S172,463 $411,480 $413,363 $18.00 Batch-related costs: Materials $1,200 s1,325 $226,800 Per batch $1,525 $1,495 $265,000 $358,375 S313,950 $585,175 $578,950 Labor Hours per batch Cost per hour Product-sustaining costs 12 11 16 18 s18.00 $18.25 S40,150 S67,680 S68,985 $18.00 $18.25 S40,824 $108,504 $109,135 $323,000 s2,005,000 $610,000 Labor $256,000 $287,000 $305,000 $561,000 Other $2,054,000 $2,123,000 $1,927,000 $3,981,000 $4,128,000 Business-sustaining costs $152,000 Labor $145,000 Other $4,560,000 $4,740,000 Total all costs $4,258,779 54,678,074 $4,949,305 $4,872,774 $13,913,084 $14,442,849