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 280,000 pounds, is as follows: Total Cost Quantity Standard Unit Cost Cost Item Direct materials: Cookie mix Milk chocolate Almonds 10 oz. 5 oz. 1 oz. $ 0.10 per oz. 0.23 per oz. 0.58 per oz. $1.00 1.15 0.58 $2.73 Direct labor:* Mixing Baking 1 min. 2 min. 14.40 per hr. 18.00 per hr. $0.24 0.60 $0.84 $1.62 $5.19 3 min. Variable overheadt Total standard cost per pound 32.40 per direct-labor hr. *Direct-labor rates include employee benefits. tApplied 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 Units (in pounds) 280,000 305,000 Revenue $2,520,000 $2,714,500 Direct material $ 764,400 $1,004,900 Direct labor 235, 200 235,920 Variable overhead 453,600 572,681 Variance 25,000 F $ 194,500 F $240, 500 U 720 U 119,081 U OCA 01 1 + AES on +10101 Variable overhead Total variable costs Contribution margin 453,600 $1,453,200 $1,066,800 572,681 $1,813,501 $ 900,999 119,081 U $360,301 U $165, 801 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. Actual Cost Usage Report for April Cost Item Quantity Direct materials: Cookie mix 3,125,000 oz. Milk chocolate 1,810,000 oz. Almonds 320,000 oz. Direct labor: Mixing 305,000 min. Baking 542,400 min. Variable overhead Total variable costs $ 312,500 506,800 185,600 73,200 162, 720 572,681 $1,813,501 4. What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for part (1)? Calculate the total contribution margin variance by computing the following variances. (Assume that all materials are used in the month of purchase.). (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) Unfavorable a. Direct-material price variance. b. Direct-material quantity variance. c. Direct-labor rate variance. d. Direct-labor efficiency variance. e. Variable-overhead spending variance.
