Case 11-55 Comprehensive Variance Analysis Used to Explain Operational Results; Review of Chapters 10 and 11; Activity-Based Costing; Sales Variances (Appendix B) Required: 1. 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. 2. What is the total contribution margin in the flexible budget column of the new report prepared for requirement 1? 3. Explain (i.e., interpret) the meaning of the total contribution margin in the flexible budget column of the new report prepared for requirement 1. 4. What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for requirement 1? Explain this total contribution margin variance by computing the following variances. (Assume that all materials are used in the month of purchase.) 1. Direct-material price variance. 2. Direct-material quantity variance. 3. Direct-labor rate variance. 4. Direct-labor efficiency variance. 5. Variable-overhead spending variance. 6. Variable-overhead efficiency variance. 7. Sales-price variance. 5. Explain the problems that might arise in using direct-labor hours as the basis for applying overhead. How might activity-based costing (ABC) solve the problems described in requirement 5a?

Auntie'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 $8.00 per pound. The standard cost per pound of chocolate nut supreme, based on Auntie's normal monthly production of 400,000 pounds, is as follows: *Direct-labor rates include employee benefits. Applied on the basis of direct-labor hours. Auntie's management accountant, Leopoldo Snchez, 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. Caimile Amoah, 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. Amoah has asked Snchez to identify the reason why the contribution margin decreased. Snchez has gathered the following information to help in his analysis of the decrease. Usage Report for April Cost Item Quantity Direct materials: Cookie mix Milk chocolate Almonds Direct labor: Mixing Baking Variable overhead Total variable costs