In 1995, RD. Kelton, established Kelton's Gingerbread Dollhouses Inc. The company assembles dollhouses which are sold in the United States. After her father-in-law's retirement in 2017, Maia Kelton assumed control of the company. In 2018, Maia expected the company's operating income to increase because the company no longer had to pay RD.'s salary of $125,000. Instead, the company's operating income decreased As Maia's accountant, you prepared operating income reconciliation from 2017 to 2018. As you are getting ready for a meeting with her, you need to explain the reasons why operating income decreased. Based on what you have learned (and still learning) this semester, evaluate the variances below. Gingerbread Dollhouses Inc. Operating Income Reconciliation 2017 - 2018 $ Difference 1,857,600 (591,600) S(256,000) (22,000) Operating Income 2017 Total Sales Mix Variance Manufacturing Variances: Direct Materials Variance Price Efficiency Direct Labor Variance Rate Efficiency Variable Overhead Variance Spending Total Manufacturing Variances Selling & General Administration Operating Income 2018 (37,850) (2,775) (30,600) S(349,225) 125,000 $1.041.775 Styles Gingerbread Dollhouses Inc. Summary of Standard Costs Simple Victorian 400 $ 200 Surmary of Standard Costs Assembly kit per dollhouse Direct labor hours per dollhouse Direct labor rate per hour Variable overhead rate per dollhouse 25 S $ 15 35 35 Sales Price Deluxe Victorian Simple Victorian 2017 900 350 $ $ 2018 900 350 Sales Mix Percent Deluxe Victorian Simple Victorian 2017 80% 20% 2018 50% 50% Total Assembled & Sold S 6,800 6,800 Gingerbread Dollhouse's Inc. Summary of Actual Costs Deluxe Victoria 2017 5.440 2018 .425 Assembly kits: Used Price per 3 $ $ Direct labor hours Direct labor rate per hour Variable overhead per dollhouse 400 16,320 25 500 10,275 27 $ $ S 35 38 Simple Victorian 2017 1.360 2018 3.460 Assembly kits: Used Price per kits Direct labor hours Direct labor rate per hour Variable overhead per dollhouse Director salaries $ $ $ 200 1,360 15 35 400,000 $ 175 3,460 $ 20 $ 41 $ 275,000 - New Rom 12 - A A Aa U ab , * A & A A E 211 - - AaBbCcDc AaBbc 1 Normal 1 No Spac... - Font Paragraph Instructions 1. Analyze each variance on the operating income reconciliation schedule on pg 1. Your analysis should be supported by calculations. Explain why the variances occurred based on Gingerbread Dollhouse's information and business model. You should analyze the company's sales mix, direct and indirect manufacturing costs, as well as general selling & administrative expenses. You need to use the detailed information on pg. 2. All standard and actual costs should be considered in support of your analysis. 2. Based on your analysis, prepare a one page professional memo with three recommendations for Maia Kelton on how to improve Gingerbread Dollhouse's performance. Project submission guidelines: 1. Submit your project no later than your class period on April 24 (MW classes) or April 25 (T/TH classes) 2. Attach the rubric included as the last page of your submission which means you will have a total of four pages to your project. Cover pages are not required. Deluxe Victorian Simple Victorian