Julia Barton, owner and manager of Barton Draperies and Window Treatments, has been receiving some complaints from her loyal clientele of interior decorators and home dcor consultants. For example, one of her loyal customers, Ashley, wanted to know why she was being charged a much higher price for an order that was almost identical to an order she placed last year. Ashley felt that the price hike was simply not justified.

Although Julia, when responding to Ashley's complaint, blamed the price hike on the rising price of materials, she herself was a bit perplexed and decided to look into the matter. Julia asked her accountant to create a report for her summarizing cost and pricing data for the last three years. The accountant presented this information in the following table:

Year 1 Year 2 Year 3 Budgeted results Revenue $2,400,000 $2,700,000 $2,000,000 Direct materials 360,000 405,000 320,000 Direct labor 750,000 840,000 600,000 Variable factory overhead 144,000 162,000 130,000 Fixed factory overhead 400,000 400,000 400,000 Variable SG&A expenses 240,000 300,000 220,000 Fixed SG&A expenses 200,000 180,000 200,000 Actual results Revenue $2,320,000 $2,800,000 Direct materials 380,000 430,000 Direct labor 710,000 880,000 Variable factory overhead 140,000 160,000 Fixed factory overhead 410,000 425,000 Variable SG&A expenses 260,000 300,000 Fixed SG&A expenses 180,000 200,000year 2 year 3 Direct materials $14,000 $14,750 Direct labor $28,000 $31,000