Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 340 cases off the production line before the end of the month. But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story.

Actual	Budget	Variance
Cases produced and sold	10,250	9,910	340	Favorable
Sales revenue	$1,930,000	$1,853,200	$76,800	Favorable
Direct material	555,951	545,050	10,901	Unfavorable
Direct labor	265,241	257,660	7,581	Unfavorable
Variable manufacturing overhead	282,447	277,480	4,967	Unfavorable
Variable selling expenses	92,292	89,190	3,102	Unfavorable
Variable administrative expenses	41,364	39,640	1,724	Unfavorable
Contribution margin	692,705	644,180	48,525	Favorable
Fixed manufacturing overhead	110,001	109,010	991	Unfavorable
Fixed selling expenses	68,875	69,370	495	Favorable
Fixed administrative expenses	128,632	128,830	198	Favorable
Operating income	$385,197	$336,970	$48,227	Favorable

Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating income for the month, but look at all the unfavorable variances on the operating costs. Can you help me understand what's going on?" "Let me look into it and I'll get back to you," Irvin replied. Irvin gathered the following additional information about the month's performance.

	Direct materials purchased: 101,082 pounds at a total of $555,951
	Direct materials used: 101,082 pounds
	Direct labor hours worked: 26,262 at a total cost of $265,241
	Machine hours used: 40,581

Irvin also found the standard cost card for a case of product.

Standard Price	Standard Quantity	Standard Cost
Direct materials	$5.5 per pound	10 pounds	$55
Direct labor	$10 per DLH	2.58 DLH	25.80
Variable overhead	$7 per MH	4 MH	28.00
Fixed overhead	$2.73 per MH	4 MH	10.92
Total standard cost per case	$119.72

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(a-g)

Prepare a performance report that will assist Lexi in evaluating her efforts to control production costs. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Price/Rate/Spending Variance	Quantity/Efficiency Variance
Direct materials	$	UnfavorableFavorableNot Applicable	$	UnfavorableFavorableNot Applicable
Direct labor	Not ApplicableFavorableUnfavorable	UnfavorableFavorableNot Applicable
Variable overhead	UnfavorableNot ApplicableFavorable	FavorableUnfavorableNot Applicable
Fixed overhead	Not ApplicableFavorableUnfavorable	Not ApplicableFavorableUnfavorable
Total	$	UnfavorableFavorableNot Applicable	$	Not ApplicableFavorableUnfavorable