Controllable costs Raw materials Labor Maintenance Supplies Total Budget $ 92,000 20,000 6,400 4,700 $ 123,100 Actual $ 110,400 30,590 9,200 2,200 $152,390 Variance $ 18,400 Unfavorable 10,590 Unfavorable 2,800 Unfavorable 2,500 Favorable $ 29,290 Unfavorable The budget had called for 4,600 pounds of raw materials at $20 per pound, and 4,600 pounds were used during August; however, the purchasing department paid $24 per pound for the materials. The wage rate used to establish the budget was $40 per hour. On August 1, however, it increased to $46 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 110 hours of overtime at a $69 rate. The projected 500 hours of labor in the budget would have been sufficient had it not been for the 110 hours of overtime. In other words, 610 hours of labor were used in August. Required a. When confronted with the unfavorable variances in her responsibility report, Ms. Morgan argued that the report was unfair because it held her accountable for materials and labor variances that she did not control. Is she correct? b. Calculate the variances of the items Ms. Morgan controlled during the period.

The budget had called for 4,600 pounds of raw materials at $20 per pound, and 4.600 pounds were used during August; however, the purchasing department paid $24 per pound for the materials. The wage rate used to establish the budget was $40 per hour. On August 1 , however, it increased to $46 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 110 hours of overtime at a $69 rate. The projected 500 hours of labor in the budget would have been sutficient had it not been for the 110 hours of overtime. in other words, 610 hours of labor were used in August. Required o. When confronted with the unfavorable variances in her responsibility report. Ms, Morgan argued that the report was unfair because it held her accountable for materials and labor variances that she did not control is she correct? b. Calculate the variances of the items Ms. Morgan controlled during the period