Comprehensive variance analysis review. FlexMem, Inc., manufactures 120 Mb diskettes that are compatible with a popular portable storage device. FlexMem sells diskettes wholesale to computer retail chains and direct marketing organizations that resell the diskettes as a house brand. The diskettes retail for an average of $9.60 per unit, and compete with wellknown brands that retail for between $12.00 and $14.40 per diskette.

FlexMem s CFO has provided you with the following budgeted standards for the month of February 2007:

Budgeted average wholesale selling price per unit $ 4.80 Total direct material standard cost per diskette $ 1.02 Direct manufacturing labour Direct manufacturing labour standard cost per hour $ 18.00 Average labour productivity rate (diskettes per hour) 300 Direct marketing cost per unit $ 0.36 Total fixed overhead $1,080,000 The VP ofMarketing forecasts sales of 1,500,000 units for the month.

On March 7, the VP of Planning and Control meets with the executive committee to discuss February results. He reports as follows:

Unit sales totalled 80% of plan. (1,200,000 units)

Actual average selling price declined to $4.44.

Productivity dropped to 250 diskettes/hour; however, because offavourable market condi¬

tions, the actual price per unit dropped to $0.96.

Fixed costs came in $36,000 below plan.

All other costs were incurred at their standard rates.

Required As the senior financial analyst, you are asked to calculate the following:

1. Static-budget and actual operating income 2. Total static-budget variance 3. Flexible-budget operating income 4. Total flexible-budget variance 5. Total sales-volume variance 6. Price and efficiency variances 7. What is the material-price variance? labour-price variance?

8. What is the material-efficiency variance? labour-efficiency variance?

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