Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Greetings! I could use some help with this longer Managerial Accounting exercise, a detailed step-by-step would help me best!! Comprehensive flexible budgets and variance analysis;

Greetings! I could use some help with this longer Managerial Accounting exercise, a detailed step-by-step would help me best!!

Comprehensive flexible budgets and variance analysis; Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 300 cases off the production line before the end of the month.
But as she glanced over the rest of 'da numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled at how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story.
Actual Budget Variance
Cases produced and sold 10,300 10,000 300 F
Sales revenue $ 2,080,600.00 $ 2,000,000.00 $80,600 F
Less variable expenses $ - $ - $ -
Direct material $ 593,160.00 $ 575,000.00 $18,160 U
Direct labor $ 290,310.00 $ 280,000.00 $10,310 U
Variable manufacturing overhead $ 231,450.00 $ 225,000.00 $6,450 U
Variable selling expenses $ 112,340.00 $ 110,000.00 $2,340 U
Variable administrative expenses $ 43,285.00 $ 42,000.00 $1,285 U
Total variable expenses $ 1,270,545.00 $ 1,232,000.00 $38,545 U
Contribution margin $ 810,055.00 $ 768,000.00 $42,055 F
Less fixed expenses $ - $ - $ -
Fixed manufacturing overhead $ 122,000.00 $ 125,000.00 $3,000 F
Fixed selling expenses $ 86,280.00 $ 85,000.00 $1,280 U
Fixed administrative expenses $ 149,000.00 $ 148,000.00 $1,000 U
Total fixed expenses $ 357,280.00 $ 358,000.00 ($720) F
Operating income $ 452,775.00 $ 410,000.00 $42,775 F
Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating income for the month, but look at all the unfavorable variances on the operating costs. Can you help me understand what's going on?" "Let me look into it and I'll get back to you," Irvin replied.
Irvin gathered the following additional information about the month's performance.
* Direct materials purchased: 55,000 pounds at a total of $632,500
* Direct materials used: 51,200 pounds
* Direct labor hours worked: 26,500 at a total cost of $290,310
* Machine hours used: 52,200
Irvin also found the standard cost card for a case of product.
Standard Price Standard Quantity Standard Cost
Direct materials $11.50 per pound 5 pounds $57.50
Direct labor $11.20 per DLH 2.5 DLH $28.00
Variable overhead $4.50 per MH 5 MH $22.50
Fixed overhead $2.50 per MH 5 MH $12.50
Total standard cost per case $120.50

I need assistance with the following portions, thank you VERY MUCH!!!

A: Calculate the direct materials price variance for the month.

B: Calculate the direct materials quantity variance for the month. C: Calculate the direct labor rate variance for the month. D: Calculate the direct labor efficiency variance for the month. E: Calculate the variable overhead spending variance for the month. F: Calculate the variable overhead efficiency variance for the month. G: Calculate the fixed overhead spending variance for the month. H: Prepare performance report that will assist Lexi in evaluating her efforts to control production costs. I: Based on your review of the performance report you prepared; do you think Lexi did a good job of controlling production expenses during the month? Why or why not?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accountancy And The Changing Landscape Of Integrated Reporting

Authors: Ioana Dragu

1st Edition

1522536221, 9781522536222

More Books

Students also viewed these Accounting questions

Question

How do patients across cultures prefer to make medical decisions?

Answered: 1 week ago