Variance and cost analysis Peterborough Food produces a wide range of breakfast cereal foods. Its granola products
Question:
Variance and cost analysis Peterborough Food produces a wide range of breakfast cereal foods. Its granola products are two of its most important prod¬ uct lines.
Because of the complexity of the granola production process, the manu¬ facturing 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 12-29 pre¬ sents the activity and cost data for this cost center for the most recent quarter. The plan data in Exhibit 12-29 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-sustain¬ ing costs for line 1 should increase by $20,000 and $100,000, respectively. The factory accountant also indicated 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-sustain¬ ing 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 gra¬ nola line cost center. In your analysis, group costs into unit-related, batch- related, product-sustaining, and business-sustaining costs.
(LO 1)
Step by Step Answer:
Management Accounting
ISBN: 9780130101952
3rd Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, S. Mark Young, Rajiv D. Banker, Pajiv D. Banker