During the COVID pandemic many people have complained they have been sitting too much. News reports are coining the phrase "sitting is the new smoking". Chiropractors and back doctors are in great demand with many people suffering from sore necks and back pain.

One company, Back2Life Corporation has taken advantage of this opportunity and created a patented stand-up computer station that is ergonomic and has people standing straight and feeling better about their health.

The company uses former celebrity patients who have suffered from terrible back pain during COVID and how they are cured in just weeks using this stand-up desk. The marketing is going very well and Back2Life are selling many of these stations over the past 2 years.

The problem is they have been so busy creating the desks and marketing them they fell behind in their accounting and have called you in to help them sort out the books for 2021. Once you are done this they would also like you to give them cost accounting advice on how to better manage their accounting and business strategy in the future based on these number.

The Back2Life budgeted to market and sell 5,000 of these work stations at $200,000 per station in 2021. They budgeted $200,000 fixed costs/year and $80.00 variable cost per station. They ended up selling 6,000 stations at $190.00, and incurred $220,000 fixed cost for the year and $78.00 variable cost per station.

SOLVE.

2.1 Prepare a comprehensive variance analysis report for Back2Life and identify the sales-volume variance and flexible budget. Be sure to label all F for favorable or U for unfavorable. Use your cost accounting knowledge to tell the Back2Life execs what the variance numbers are indicating?

2.2 Based on the numbers that you find, give your cost accounting advice to the Back2Life company so they can better sort out their accounting and make a more organized decision making and business strategy for the rest of 2021 and 2022. What should they do long term to keep their success going after the COVID pandemic effect lessens?