RJM Enterprises is a manufacturer of consumer electronics products. The industry is very competitive and RJM has seen its profits fall in recent years, including an operating loss of $18,585 in 2009. RJM was able to turn that around in 2010 by aggressively cutting costs. The summarized financial results for RJM are shown below.

Jim Green, the management accountant at RJM, is analyzing the company’s performance for 2010, in order explain to management the specific aspects that drove the company to success. Some of the information Jim obtained is:

Assume that RJM, for efficiency and to reduce cost, maintains little or no materials or work in process inventory.

Required

1. Determine the selling price variance for 2010 based on sales dollars. Determine the volume variance based on contribution margin.

2. Determine the variable cost variances:

a. The usage and price variances for materials.

b. The usage and rate variances for labor.

3. Interpret your findings in parts 1 and 2above.

Transcribed Image Text:

2009 2010 $934,920 $1,273,545 Gross sales: Less variable costs Materials $550,368 $ 746,200 Labor 329,280 511,875 Total contribution margin $ 55,272 $ 15,470 Fixed costs 34,055 33,509 $ 21,763 $ (18,585) Operating income