Comprehensive variance analysis responsibility issues. (CMA, adapted) Horizons Unlimited manufactures a full line of well-known sunglass frames and lenses. Horizons uses a standard cost system to set attainable standards for direct materials, labour, and overhead costs. Standards have been reviewed and revised annually, as necessary.

Departmental managers, whose evaluations and bonuses are affected by their department’s performance, have been held responsible to explain variances in their departmental per¬

formance reports.

Recently, the manufacturing variances in the Visionaire prestige line of sunglasses have caused some concern. For no apparent reason, unfavourable material and labour variances have increased. At the monthly staff meeting, Jim Denton, manager of the Visionaire line, will be expected to explain his variances and suggest ways of improving performance. The performance report for 2007 that Denton will be asked to explain is presented below.
Actual Results Static Budget Amounts Units sold 4,850 5,000 Revenues $477,240 $480,000 Variable manufacturing costs - 281,572 259,200 Fixed manufacturing costs 86,718 90,000 Gross margin 108,950 130,800 Denton collected the following information:

a. The standard variable manufacturing costs in 2007 comprise three items:
Direct materials: Frames. Static budgeted cost of $39,600. The standard input (in grams)
for 2007 is 3.00 grams per unit.
Direct materials: Lenses. Static budgeted costs of $111,600. The standard input (in grams)
for 2007 is 6.00 grams per unit.
Direct manufacturing labour. Static budgeted costs of $108,000. The standard input (in hours) for 2007 is 1.20 hours per unit.
Assume there are no indirect manufacturing costs.

b. The actual variable manufacturing costs in 2007 were Direct materials: Frames. Actual costs of $44,698. Actual grams used per frame was 3.20 grams per unit.
Direct materials: Lenses. Actual costs of $120,590. Actual grams used per frame was 7.00 grams per unit.
Direct manufacturing labour. Actual costs of $116,284. The actual labour rate was $17.76 per hour.
Required 1. Prepare a manufacturing performance analysis report that includes

a. 8elling-price variance

b. $ales-volume variance and flexible-budget variance for revenues variable manufacturing costs fixed manufacturing costs gross margin

c. Price and efficiency variances for total direct materials direct materials: lenses direct manufacturing labour 2. Give three possible explanations for each of the three price and efficiency variances at Lforizons in requirement 1(c).