Amboy Specialty Foods Current Last Quarter Quarter Variance F/U # of Cases Sold per Case 99.000 per Case 100,000 Sales Revenue $ 26.90 $ 2,663,100 $ 26.00 $ 2,600,000 63,100 F Less: Var Cost of Goods Sold Direct Materials-Block Cheese $21.78 $ 2,156,220 $18.00 $ 1,800,000 $ 356,220 U Direct Materials--Oil etc $0.50 $ 49,500 $0.50 $ 50,000 500 F Direct Materials--Packaging $0.30 29,700 $0.30 30,000 300 F Direct Labor $1.83 $ 181,170 $1.50 $ 150,000 31,170 U Variable OH $3.35 331,650 $3.00 300,000 $ 31,650 U Contribution Margin ($0.86) $ (85,140) $2.70 $ 270,000 355,140 U Selling and Administrative Costs 165,000 150,000 $ 15,000 U Net Operating Income $ (250,140) $ 120,000 $ 370,140 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 653,400 600,000 Cost per Pound of Block Cheese $3.30 $3.00 Direct Materials - Other Oil, cheese powder, spices & preservatives per Case $0.50 $0.50 Packaging per Case $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 $150,000Amboy Specialty Foods Current Last Quarter Quarter Variance F/U # of Cases Sold per Case 99.000 per Case 100,000 Sales Revenue $ 26.90 $ 2,663,100 $ 26.00 $ 2,600,000 63,100 F Less: Var Cost of Goods Sold Direct Materials-Block Cheese $21.78 $ 2,156,220 $18.00 $ 1,800,000 $ 356,220 U Direct Materials--Oil etc $0.50 $ 49,500 $0.50 $ 50,000 500 F Direct Materials--Packaging $0.30 29,700 $0.30 30,000 300 F Direct Labor $1.83 $ 181,170 $1.50 $ 150,000 31,170 U Variable OH $3.35 331,650 $3.00 300,000 $ 31,650 U Contribution Margin ($0.86) $ (85,140) $2.70 $ 270,000 355,140 U Selling and Administrative Costs 165,000 150,000 $ 15,000 U Net Operating Income $ (250,140) $ 120,000 $ 370,140 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 653,400 600,000 Cost per Pound of Block Cheese $3.30 $3.00 Direct Materials - Other Oil, cheese powder, spices & preservatives per Case $0.50 $0.50 Packaging per Case $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 $150,000PART 1 CASE REQUIREMNTS Discussion Questions Prepare a brief written answer to each of the following questions. i.Based solely on the change in the volume ofsales, by how much should Terry expect the current quarter income to be greater (less than) last quarter's income? 2. Compared to the previous quarter, in the current quarter the price per case and the number of cases sold changed. What was the impact of these two factors on the operating income? 3. After adjusting for the change in sales volume, how did variable and xed costs impact Amboy's current quarter income? 4. Is the previous quarter's performance a reasonable standard to use in the analysis? Explain. 5. What did Terry learn from the variance analysis about how variable costs changed? 6. Was variance analysis an appropriate accounting tool for Terry to use in this context? Explain. 7. Based on the income reconciliation schedule, which ofthese variances do you want to focus on investigating and why? 1