Aunt Molly’s Old Fashioned Cookies bakes cookies for retail stores. The company’s best-selling cookie is chocolate nut supreme, which is marketed as a gourmet cookie and regularly sells for $9.00 per pound. The standard cost per pound of chocolate nut supreme, based on Aunt Molly’s normal monthly production of 410,000 pounds, is as follows:

Cost Item	Quantity						Standard Unit Cost				Total Cost
Direct materials:
Cookie mix			10	oz.			$	0.05	per oz.				$	0.50
Milk chocolate			5	oz.				0.18	per oz.					0.90
Almonds			1	oz.				0.53	per oz.					0.53
													$	1.93
Direct labor:*
Mixing			1	min.				14.40	per hr.				$	0.24
Baking			2	min.				24.00	per hr.					0.80
													$	1.04
Variable overhead†			3	min.				38.40	per direct-labor hr.				$	1.92
Total standard cost per pound													$	4.89

*Direct-labor rates include employee benefits.
†Applied on the basis of direct-labor hours.

Aunt Molly’s management accountant, Karen Blair, prepares monthly budget reports based on these standard costs. April’s contribution report, which compares budgeted and actual performance, is shown in the following schedule.

Contribution Report for April
		Static Budget				Actual				Variance
Units (in pounds)			410,000				435,000				25,000	F
Revenue		$	3,690,000			$	3,871,500			$	181,500	F
Direct material		$	791,300			$	1,055,450			$	264,150	U
Direct labor			426,400				413,920				12,480	F
Variable overhead			787,200				816,775				29,575	U
Total variable costs		$	2,004,900			$	2,286,145			$	281,245	U
Contribution margin		$	1,685,100			$	1,585,355			$	99,745	U

Justine Madison, president of the company, is disappointed with the results. Despite a sizable increase in the number of cookies sold, the product’s expected contribution to the overall profitability of the firm decreased. Madison has asked Blair to identify the reason why the contribution margin decreased. Blair has gathered the following information to help in her analysis of the decrease.

Usage Report for April
Cost Item	Quantity			Actual Cost
Direct materials:
Cookie mix		4,425,000	oz.		$	221,250
Milk chocolate		2,590,000	oz.			595,700
Almonds		450,000	oz.			238,500
Direct labor:
Mixing		435,000	min.			104,400
Baking		773,800	min.			309,520
Variable overhead						816,775
Total variable costs					$	2,286,145

Case 11-55 Part 1

Required:
Prepare a new contribution report for April, in which:

• The static budget column in the contribution report is replaced with a flexible budget column.
• The variances in the contribution report are recomputed as the difference between the flexible budget and actual columns.