denly the highest favorable variance and high unsere variance from the sixte in requirement d and provide one possible cause of each vacance 59. Variable Production Cost Variance Analysis and Performance Evaluation. Dear fold Plastics, Inc., produces plastic snow shovels. Variable overhead is applied to products based on machine hours. The company as a just-in-time production system and thus insign icant inventory was at the end of each month. The income statant for the month of January comparing actual results with the flexible budget is shown below based on actual acks of 10.000 units. Doorfield Plastics, Inc. Income Statement (budget versus actuall Actual Budget Variance Baka 3 305,000 $ 300,000 $ Variable cof 108,700 100,000 15.000 Favorable 8700 Unbvorane goods sold Variable sling and 78,000 10,000 6.000 Unlavorare administrative Contribution margin 120.000 130.000 Flead cost of goods 53,000 65,000 12.000 9.700 Unfavorab Favorable sold Fixed sling and 38,000 35,000 3,000 Unava administrative Net prott $ 29,300 $ 40,000 $ 10:00 Unfavorab Pics, Inc., is disappointed with the actual reads and has hired you so a co- and to provide further emotion as to why the company has been strugging to meet budgeted net income. Your review of the previously preserved budget versus acul analysis identifies variable cost of goods sold as the main culprit. The unfavorable variance for this In tem is $8./00 Ater further end, you are able to track down the standard cod information for variab production pote Demeteries (12 pounds per unit at 90.50 pound Direct labor (0.20 hours at $15 per hour 8 Variable overhead (0.10 machine hours at $10 per hour) Standard variable production cost per unit 598 Fundamentals of Managerial Accounting Standard Cost per 10 Achal production inkomation dated to variable cost of goods sold for the month of January 10,000 units were produced and sold 150,000 pounds of material was purchased and used at a total cost of $67,500 1,900 dct labor hours were cad during the month at a lost cost of $30,400 1,200 machine hours were used during the me Variable overhead costs totaled $10,800. Required: a. Calculate the materials price variance and materials quantity variance using the format shown in Figure 10.2. Clearly label cach variance as favorable or unfavorable. b. Calculate the labor rate variance and labor eficiency varianos using the format shown in Figure 10.3. Clearly take each variance leverste or unlovable. c. Calculate the variable overhead spending variance and variable overhead efficiency van- ance using the format shown in Figure 10.4. Clearly label each variance as favorable or untaverable. d. List aach of the six variances calculated in requirements a, b and c, and total the variances to show one net varianos. Clearly label the net variance as favorable or unfavor an. Explain how this cal variance relates to variable cost of goods sold on the income watement Identify the highest favorable variance and highest unfavorable wanance from the se in requirement d. and provide one possible cause of each variance. 1. Jan Phalen, the manager at Doorfield Plastics, Inc., reviewed the company's varianco analysis report for the month of January. The materials price variance of $17,500) was the most significant favorable variance for the month, and the materials quantity vari ance of $15,000 w the most significant unfavoraba varianos Jan would like to reward the company's purchasing agent for achieving such statantis savings by giving him $2.000 bens while not providing any bonus for the production manager 1. Do you agree with Jan's approach to awarding bonuses? Explain 2. What circumstances might lead to the conclusion that the purchasing agent should not recove a bonus for the month of January