(Appendix) Interpret a standard cost income statement (Learning Objective 6)

The managers of Viewx, a contract manufacturer of DVD drives, are seeking expla¬ nations for the variances in the following report. Explain the meaning of each of Viewx’s materials, labor, and overhead variances.

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Sales revenue VIEWX CO. Standard Cost Income Statement Year Ended December 31, 2007 Cost of goods sold at standard cost Manufacturing cost variances: $1,200,000 700,000 Direct materials price variance $ 8,000 F Direct materials efficiency variance 32,000 U Direct labor price variance 24,000 F Direct labor efficiency variance 10,000 U Manufacturing overhead flexible budget variance 28,000 U Production volume variance 8,000 F Total manufacturing variances 30,000 Cost of goods sold at actual cost 730,000 Gross profit Marketing and administrative expenses Operating income 470,000 418,000 $ 52,000