Heffle manufactures tennis rackets and uses a standard costing system. The master budget income statement for April was based on the expectation of producing 20,000 units and selling 16,800 units. The budgeted sales price was $38 per unit, and total budgeted fixed selling and administrative costs were $170,200. There are no variable selling and administrative costs in this firm. Standard manufacturing costs used in determining costs under the master budget are listed below in Exhibit A.

Exhibit A*

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	Per Racket
Raw material:
Frame: 1.02 frames at $8.00 per frame	$ 8.16
Stringing materials: 22 feet at $0.13 per foot	2.86
Direct labor: 0.3 hours at $14.40 per hour	4.32
Variable overhead	3.66
Fixed overhead	5.00
Total standard cost per tennis racket	$24.00

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*Standard costs are calculated for a production volume (denominator level of activity) of 25,000 units each month.

The company actually sold 24,500 units in April. The accountants determined that the actual profits in April were $162,167. The income statement is provided in Exhibit B.

Exhibit B

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Heffle Inc.

Income Statement for April

Actual

Sales:
24,500 rackets at $39.10	$957,950
Standard cost of goods sold:
24,500 rackets at $24.00	588,000
Unfavorable Material variance	12,830
Unfavorable Labor variance	4,873
Unfavorable Variable Overhead variance	6,180
Unfavorable Fixed Overhead variance	18,900
Cost of goods sold after adjustment for variances	630,783
Gross Margin	327,167
Selling and administrative expense	165,000
Operating profit	$ 162,167

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Actual production data for April is given in Exhibit C.

Exhibit C

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Direct materials purchased and used:
Stringing materials	512,000 feet at $0.11 per foot
Frames	23,000 frames at $8.65 per frame
Labor: ($14.65 per hour)	6,820 hours
Overhead:
Variable	$ 86,700
Fixed	$128,900
Production	22,000 rackets

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The manager of the company is unable to explain why the accountants profits are different from the amount of profits according to the flexible budget income statement.

Required:

1. Prepare a very detailed manufacturing cost variance analysis (e.g., calculate price, efficiency, spending, and production volume variances.) An analysis should be done for each type of direct material (ie., string and frames should be examined separately). In addition an analysis should be done for direct labor and for fixed manufacturing overhead. Do not do a variance analysis for variable overhead costs since no allocation base is given. All variances should be marked with either an F for favorable or U for unfavorable. Prepare the analysis using an appropriate format covered in class.