Larsens Creamery has a costing system with two direct cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2020 Larsen adopted the following manufacturing cost standards. Input Cost per Output Unit Direct materials 3 lb. at $5 per lb. $15.00 Direct manufacturing labor 5 hours at $15 per hour $75.00 Manufacturing overhead Variable $6 per DLH $30.00 Fixed $8 per DLH $40.00 Standard manufacturing cost per output unit $160.00 The denominator level for total manufacturing overhead per month in 2020 is 40,000 direct manufacturing labor-hours. Larsens flexible budget for March 2020 was based on this denominator level. The records for March 2020 indicated the following: Direct materials purchased 25,000 lb. at $5.20 per lb. Direct materials used 23,100 lb. Direct manufacturing labor 40,100 hours at $14.60 per hour Actual fixed manufacturing overhead $350,000 Actual variable manufacturing overhead $250,000 Actual production 7,800 output units

Write a memo to managers about the issues you see and what actions you would recommend. Comment on how sustainability issues would influence your recommendation.