Colonial Cookies, Inc., 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 Colonial's normal monthly production of 290,000 pounds, is as follows: Quantity Standard Unit Cost Total Cost Cost Item Direct materials: Cookie mix Milk chocolate Almonds 10 oz. $ 5 oz. 02 per oz. .15 per oz. 50 per oz. $.20 75 1 oz. -50 $1.45 Direct labor:* Mixing Baking 1 min. 2 min. 14.40 per hr. 18.00 per hr. $.24 60 $.84 Variable overheadt 3 min. 32.40 per per direct-labor $1.62 Total standard cost per pound $3.91 *Direct-labor rates include employee benefits. fApplied on the basis of direct-labor hours. Colonial's management accountant, Karen Blair, prepares monthly budget reports based on these standard costs. February's contribution report, which compares budgeted and actual performance, is shown in the following schedule. Contribution Report for February Static Budget Actual Units (in pounds) 290,000 315,000 Revenue $2,610,000 $2,803,500 Variance 25,000 F $193,500 F Direct material $ 420,500 $ 603,500 $183.000 U Direct labor 2 43,600 243,660 60 U Variable overhead 469,800 591,457 121,657 U Total variable $ 1,133,900 $ 1,438,617 $ 304,717 U costs Contribution margin $ 1,476,100 $ 1,364,883 $ 111,217 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 February Cost Item Quantity Actual Cost Direct materials: Cookie mix 3,225,000 oz. $ 64,500 Milk chocolate 1,870,000 oz. 374,000 Almonds 330,000 oz. 165,000 Direct labor: Mixing 315,000 min. 75,600 Baking 560,200 min. 168,060 Variable overhead 591,457 Total variable costs $1,438,617 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).) 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. f. Variable-overhead efficiency variance. g. Sales-price variance. Total
