Kiwi Company produces automobiles. It had budgeted sales and production of 10,000 cars for 2016at a selling price of $5000 each.

The company had budgeted the following costs for 2016:

Standard Variable Manufacturing Costs per unit $4000

Fixed Manufacturing Overhead for the year $3,000,000

Selling and Admin Costs: Variable (per unit) $500

Fixed (total for year) $1,000,000

The company actually sold 11,000 cars for $4800 each. Suppose that at the end of the year the financial results for the period are:

Variable Manufacturing Costs $46,000,000

Variable Selling and Admin Costs $3,500,000

Fixed Manufacturing Costs $2,000,000

Fixed Selling and Admin Costs $1,200,000

Required:

5. Compute volume variances and combined price/efficiency variances for variable costs.

6. What is the volume variance for fixed manufacturing costs?

7. Kiwi has two responsibility centers: production and sales. Production is responsible for efficiently purchasing for and producing the necessary amount of production. Sales are responsible for pricing and therefore the amount sold, as well as for controlling selling and administrative costs.

a - Which combination of variances would you use to evaluate the two departments?

b- Which variances would you view as uncontrollable?

c - Each year a cash bonus of $1000 per person is paid to all the individuals in the department (production or sales) who performed most above expectations. Which department will receive the 2016 bonuses?