After leaving the Colonel's office, Terry prepared a comparative variable costing income statement for the last two quarters. Amboy Specialty Foods Current Last Quarter Quarter Variance F/U 100,000 # of Cases Sold per Case 115,000 per Case Sales Revenue $26.90 $3,093,500 $26.00 $2,600,000 $ 493,500 F $1,800,000 $ (704,700) U Less: Var Cost of Goods Sold Direct Materials-Block Cheese Direct Materials--Oil etc Direct Materials--Packaging Direct Labor $21.78 $2,504,700 $18.00 $0.50 $ 57,500 $0.50 $ 50,000 $ (7,500) U $0.30 S 34,500 $0.30 $ 30,000 $ (4,500) U $1.83 210,450 $1.50 150,000 (60,450) U Variable OH $3.35 385,250 $3.00 300,000 (85,250) U Contribution Margin ($0.86) $ (98,900) $2.70 $ 270,000 $ (368,900) U Selling and Administrative Costs 165,000 150,000 (15,000) U Net Operating Income $ (263,900) $ 120,000 $ (383,900) U Terry also generated a report of input costs for the two quarters. Current Last Quarter Quarter Cost Inputs Direct Materials - Block Cheese Pounds of Cheese per Case 6.6 6.0 Pounds of Block Cheese Purchased & Used 759,000 600,000 Cost per Pound of Block Cheese $3.30 $3.00 Direct Materials - Other Oil, cheese powder, spices & preservatives per Case Packaging per Case $0.50 $0.50 $0.30 $0.30 Direct Labor Hours per Case 0.12 0.10 Direct Labor Rate per Hour $15.25 $15.00 Variable Manufacturing Overhead per Case $3.35 $3.00 Selling and General Administration $165,000 $150,000 Variance Analysis Table Method # of Cases Sales Revenue Direct Materials-Block Cheese 2,600,000 1,800,000 $ 50,000 $ Direct Materials-Oil etc $390,000 (270,000) (7,500) (4,500) (22,500) (45,000) Direct Materials-Packaging 30,000 $ Direct Labor $ 150,000 $ Variable OH $ 300,000 $ 150,000 $ SG & A $ Net Operating Income $ 120,000 1. Complete the Flexible Budget using Standard Costs from the case 2. Find the Volume Variance for Direct Materials (Cheese) and Direct Labor 3. Find the Spending Variance for Direct Materials (Cheese) and Direct Labor 4. Using the Spending Variance, separate into: (a) Price and Quantity Variances for Direct Materials (b) Rate and Efficiency Variances for Direct Labor Direct Materials SP = SQ = AP = AQ= Direct Labor SR= SH= AR = AH = Last Quarter 100,000 $ $ $ $ 690,000 Volume Variance Flexible Budget 115,000 $2,990,000 $ $2,070,000 $57,500 $34,500 $172,500 $345,000 $150,000 Price (SP-AP) X AQ Rate (SR-AR) X AH Spending Variance Actual Results Total Variance 115,000 3,093,500 $ 2,504,700 $ 57,500 $ 34,500 $ 210,450 $ 385,250 $ 493,500 F (704,700) U (7,500) U (4,500) U (60,450) U (85,250) U (15,000) U 165,000 $ $ (263,900) $ (383,900) Usage (SQ-AQ) X SP Efficiency (SH - AH) X SR 103,500 $ ($434,700) $ $0 $0 $ ($37,950) $ ($40,250) $ ($15,000) $ Direct Materials. Spending ($434,700) Direct Labor Spending standard cost card - materials (cheese) amount cost Standard cost card-labor amount cost 6 pounds per case 3 per pound $18.00 per case 0.1 hours per case $15.00 per hour $1.50 per case