Kimee Baldwin was a bit anxious as she created the year end performance reports She remembered how management had hoped the economy would make a favorable turn, taking pressure off consumers so theyd feel more comfortable spending on the companys splurge itema luxurious hooded cotton robe Alas, actual production and sales ended at 5,500 units, a whopping 1,000 units shy of the companys original budget The following information presents the companys actual income statement and other key information for Kimee Actual Income Sales $852,500 Variable costs DM 189,000 (for 13,500 yards purchased and used) DL 83,460 (for 4,280 hours used) Variable MOH 53,300 Contribution margin 526,740 Fixed costs Fixed MOH 217,500 Fixed SG A 240,500 Operating income $68,740 Standards are as follows Standard Quantity per Unit Standard Price Direct materials 2 50 yards $15 per yard Direct labor 0 75 DL hours $20 per DL hour Variable MOH 2 50 yards $5 per yard Fixed MOH 2 50 yards $14 per yard Additional master budget information Selling price $175 Fixed SG A expense $285,000 Explain what may have caused these DM variances DM price variance $13,500 Favorable DM efficiency variance $3,750 Favorable Expected DM use 13,750 yards type your explanation here Explain what may have caused these DL variances DL price variance $2,140 Favorable DL efficiency variance $3,100 Unfavorable Expected DL use 4,125 hours type your explanation here If Kimee had neglected to prepare a flexible budget and instead directly compared the companys actual results to the original master budget, what conclusions might have been drawn In a brief memo to the accounting intern at this company, explain the usefulness of a flexible budget and subsequent variance analysis (as was done here for DM and DL), not only for performance evaluation purposes but also for future planning, control, and motivational purposes Include in your memo whether you believe this type of analysis could help a company make meaningful improvements going into the next year type your explanation here

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Kimee Baldwin was a bit anxious as she created the year-end performance reports. She remembered how management had hoped the economy would make a favorable

Kimee Baldwin was a bit anxious as she created the year-end performance reports. She remembered how management had hoped the economy would make a favorable turn, taking pressure off consumers so theyd feel more comfortable spending on the companys splurge itema luxurious hooded cotton robe. Alas, actual production and sales ended at 5,500 units, a whopping 1,000 units shy of the companys original budget. The following information presents the companys actual income statement and other key information for Kimee.

Variable costs:
Actual Income
Sales	$852,500
DM	189,000	(for 13,500 yards purchased and used)
DL	83,460	(for 4,280 hours used)
Variable-MOH	53,300
Contribution margin	526,740
Fixed costs:
Fixed-MOH	217,500
Fixed SG&A	240,500
Operating income	$68,740

Standards are as follows.

	Standard Quantity per Unit		Standard Price
Direct materials	2.50	yards	$15	per yard
Direct labor	0.75	DL hours	$20	per DL hour
Variable-MOH	2.50	yards	$5	per yard
Fixed-MOH	2.50	yards	$14	per yard

Additional master budget information:

Selling price		$175
Fixed SG&A expense		$285,000

Explain what may have caused these DM variances.

DM price variance	$13,500	Favorable
DM efficiency variance	$3,750	Favorable
Expected DM use	13,750	yards

type your explanation here

Explain what may have caused these DL variances.

DL price variance	$2,140	Favorable
DL efficiency variance	$3,100	Unfavorable
Expected DL use	4,125	hours

type your explanation here

If Kimee had neglected to prepare a flexible budget and instead directly compared the companys actual results to the original master budget, what conclusions might have been drawn? In a brief memo to the accounting intern at this company, explain the usefulness of a flexible budget and subsequent variance analysis (as was done here for DM and DL), not only for performance evaluation purposes but also for future planning, control, and motivational purposes. Include in your memo whether you believe this type of analysis could help a company make meaningful improvements going into the next year. type your explanation here