Case 3: UP Dining Concepts Sandy Smith is the kitchen manager for UP Dining Concepts DBA, maker of Ed's Iguana Pasties. UP Dining Concepts got its start when Ed Baker, a snowbird from Michigan's UP, tried Iguana meat during a winter stayover in South Florida. He was so impressed that he bought a pound of the meat at a farmer's market, froze it, and took it back to the UP to share with his friends. He didn't have quite enough to make it a meal, so he served it in a pastie (pronounced Pass-T)-a Northern Michigan traditional dish. Over time it became his tradition to serve Iguana pasties each spring when he returned from the South. Eventually, he built a kiosk out of a shed mounted on a trailer and started having his grandkids sell Ed's Iguana Pasties at fairs and other summer events to help them pay for college. Within a few years the business had expanded enough to open a central kitchen to prepare pasties. Because of health regulations, the pasties are prepared in a central kitchen managed by sandy Smith. Sandy is a great cook and longtime UP resident. She keeps things lively in the kitchen by telling UP jokes, eh? When things are too busy in the kitchen for her, she recruits relatives to help her out. Sometimes they aren't as precise in preparing the pasties as she would like, but when the orders come in, the pasties must be made. Up until now, Ed hasn't worried too much about numbers. He knows a good pastie, and his emphasis has always been on the customer experience and having a fun time. But this summer his grandkids decide to put their college accounting to work and suggest that he try using variance analysis. It seemed like a good idea to use some kind of system to know if the pasties are being prepared properly, and the grandkids are persistent. Ed sits down with his budding management accountants and puts together a plan. A few day later, this is what they have: The June budget, based on standard costs: Budgeted Production 2,500 pasties Direct materials Dough-$275 (0.25 Lbe. @ $0.44/Lb. x 2,500) Filling spices-$900 (0.75 Lbs. @ $0.48/Lb. x 2,500) Iguana meat--$5,000 (1/16 Lb. @ $32.00/Lb. x 2,500) Direct Labor $2,250 (0.05 DLH@ $18.00/Hr. x 2,500) VOH $1,875 (VOH allocated at $15.00 per DLH x 125 DLH)At the end of the month, Dave's accountant sends him the following financial results (along with a bill for services: Actual June performance of the central pastie kitchen: Actual Production 2,400 pasties Direct material: Dough-$302.40 (0.30 Lbs. (@ $0.42/Lb. x 2,400) Filling/spices-$1,008.00 (0.70 Lbs. @ $0.60/Lb. x 2,400) Iguana meat--$5,241.60 (.91 oz. (@ $2.40/oz. x 2,400) Direct Labor $2,244.00 (0.055 DLH@ $17.00/Hr. x 2,400) VOH $1,293.00 Dave and his grandkids sit down and compare the actual numbers to the budget, and this is what they see: UP Dining Concepts Kitchen Performance Report For the Month of June Actual Budget Variance bough--$302.40 Dough--$275.00 $ 27.40 U Filling/spices-- $1,008.00 Filling/spices-- $900.00 $ 108.00 U Direct Materials guana meat--$5,241.60 Iguana meat--$5,000.00 $ 241.60 U Direct labor $2,244.00 $2,250.00 $ 6.00 F variable OH $1,893.00 $1,875.00 $ 18.00 U Total $10,639.00 $10,300.00 $ 389.00 U Ed takes a look at the numbers and shrugs. "The actual results are only about 4%% over budget, and most of that is in the ingredients. Everything looks pretty good to me" he says. Is Ed's analysis correct