At the monthly management meeting, Leslie Smith,president of Mama Fran's Fantastic Foods, was reviewing the April budget report with some satisfaction."Our actual results are never exactly what we budget, but I guess if we're off by only 2% to 3%, we've done a good job forecasting."The report she referred to follows:

April Budget Report

ActualBudgetVariance

Sales (in pounds)450,000400,00050,000 F

Revenue$3,555,000$3,200,000$355,000 F

Less Variable Expenses

Direct Materials865,000580,000285,000 U

Direct Labor348,000336,00012,000 U

Variable Overhead750,000648,000102,000 U

Total Variable Expenses1,963,0001,564,000399,000 U

Contribution Margin$1,592,000$1,636,000($44,000 U)

Nathan Porter, the company's purchasing manager, chimed in."It surprises me that we did as well as we did.I know that chocolateprices went up dramatically last month, so I expected a much larger variance.And we had that little mix-up when we ordered a batch of whole almonds instead of sliced almonds."

But controller Ashley Corley looked concerned."Hang on a minute, guys.I don't think this budget report gives us the true picture.Let me work on it some more and get back to you."

Ashley's first step was to track down the following standard cost card for the cookies:

Chocolate Nut Supreme Cookies

(per cookie)

ItemQuantityStandard Unit CostTotal Cost

Direct materials:

Cookie Mix10 oz$0.02 per oz$0.20

Milk Chocolate5 oz$0.15 per oz0.75

Almonds1 oz$0.50 per oz0.50

Total Direct Materials$1.45

Direct Labor:

Mixing1 min.$14.40 per Hour$0.24

Baking2 min$18.00 per Hour0.60

Total Direct Labor $0.84

Ashley also tracked down this additional information about the month's operations:

ItemActual Quantity UsedActual Cost

Direct Materials:

Cookie Mix4,650,000 oz$93,000

Milk Chocolate2,660,000 oz532,000

Almonds480,000 oz240,000

Direct Labor:

Mixing540,000 minutes108,000

Baking800,000 minutes240,000

Total Variable Costs$1,213,000

Required:

a.Prepare a more informative performance report for the month of April (use the template in the Flexible Budget section)

b.Are the results better or worse than Leslie had first thought?Explain your answer.

c.Calculate the direct materials variances for each input, assuming that all materials purchased were used during the month.

d.Calculate the direct labor variances for April.

e.What do you think may have caused the April Variances?Are the two situations mentioned by Nathan factors in these variances?Explain.