Goal: To perform basic variance analysis to help determine the cause(s) for missing budget targets. Information: Frogs, Inc. decided to add the new commercial projects this year. You have prepared a CM Income Statement at the end of the first year of providing the service. After showing your results to the Owners, they are concerned that Frogs, Inc. decision to provide the commercial projects was the wrong decision. They have asked you to perform a basic variance analysis to give them more information. Here is the information you have gathered: Budgeted Actual Sales Information # of projects sold 100 75 Sales Price/Project (average) $36,000 $38,000 DL Information Hours per project Owners 40 38 Designers 120 130 Sr. Engineers 80 75 Jr. Engineers 240 260 Concrete Casters 40 35 Wages/hour Owners $45 $50 Designers $35 $40 Sr. Engineers $30 $35 Jr, Engineers $25 $23 Concrete Casters $20 $23 Variable MOH Information Driver Usage per Project Owners 1 1 Designers 1 1 Engineering 320 335 Concrete Casting 20 25 POHR for each department Owners $52.50 $50* Designers $160 $175* Engineering $7.21 $7.75* Concrete Casters $13.80 $13.00* Frogs, Inc. Page 13 of 13 *Actual Variable OH rates have been included in the chart for ease of computations. Fixed costs actual expenditures were as follows: warehouse rent $125,000, Insurance $45,000, Equipment depreciation $250,000, department supervisor $60,000, and direct advertising $20,000. One last note: The economy has remained steady and growth is actually increasing in the area as many new businesses are expanding. Assignment: 1. What is the fundamental underlying issue (or issues) for this problem? Explain. 2. What are the Labor Rate and Efficiency variances for the commercial projects? You will need to compute the variance for each level of employee independently and report the total variances for all employees. The more information here, the better analysis you will have. 3. What are the Variable Manufacturing Overhead Spending and Efficiency variances for the commercial projects? You will need to examine each department separately and report the total variance for each department. 4. What are the Sales Price and Sales Volume Variances for the commercial projects? 5. What is the DM price variance and quantity variance? There is not enough information to break this down into each material so just provide the total variance. 6. Based on your answers to the previous questions, how could Frogs, Inc. improve the production process of the commercial projects? Explain. Hint: The best way to compute these variances quickly is to create a template in Excel and compute each variance. Doing the calculations by hand will take much longer. I do not need to have your spreadsheet for this assignment, only your typed answers in a document.