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 300 cases off the production line before the end of the month. But as she glanced over the rest of numbers, Lexi couldnt help but wonder if there were errors in some of the line items. She was puzzled at 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		10,300			10,000			300	Favorable
Sales revenue		$2,081,900			$1,990,000			$91,900	Favorable
Less variable expenses
Direct material		593,400			576,800			16,600	Unfavorable
Direct labor		289,800			279,000			10,800	Unfavorable
Variable manufacturing overhead		231,500			229,200			2,300	Unfavorable
Variable selling expenses		113,300			111,600			1,700	Unfavorable
Variable administrative expenses		43,400			42,800			600	Unfavorable
Total variable expense		1,271,400			1,239,400			32,000	Unfavorable
Contribution margin		810,500			750,600			59,900	Favorable
Less fixed expenses
Fixed manufacturing overhead		128,000			132,300			4,300	Favorable
Fixed selling expenses		85,900			85,300			600	Unfavorable
Fixed administrative expenses		150,000			148,500			1,500	Unfavorable
Total fixed expense		363,900			366,100			(2,200)	Favorable
Operating income		$446,600			$384,500			$62,100	Favorable

Lexi picked up the phone and called Irvin. Irvin, I dont 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 whats going on? Let me look into it and Ill get back to you, Irvin replied. Irvin gathered the following additional information about the months performance.

		Direct materials purchased: 55,300 pounds at a total of $652,540
		Direct materials used: 51,200 pounds
		Direct labor hours worked: 27,280 at a total cost of $300,168
		Machine hours used: 52,000

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

		Standard Price		Standard Quantity		Standard Cost
Direct materials		$11.80 per pound		5.00 pounds		$59.00
Direct labor		$11.10 per DLH		2.60 DLH		28.86
Variable overhead		$4.50 per MH		5 MH		22.50
Fixed overhead		$2.60 per MH		5 MH		13.00
Total standard cost per case						$123.36

(a-g)

(a-b) Calculate the direct material price variance and direct material quantity variance for the month. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Direct material price variance		$enter a dollar amount	select an option Not ApplicableFavorableUnfavorable
Direct material quantity variance		$enter a dollar amount	select an option Not ApplicableFavorableUnfavorable

(c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to 0 decimal places, e.g. 1,525. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Direct labor rate variance		$enter a dollar amount	select an option FavorableNot ApplicableUnfavorable
Direct labor efficiency variance		$enter a dollar amount	select an option UnfavorableNot ApplicableFavorable

(e-f) Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Variable overhead spending variance		$enter a dollar amount	select an option Not ApplicableUnfavorableFavorable
Variable overhead efficiency variance		$enter a dollar amount	select an option Not ApplicableFavorableUnfavorable

(g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Fixed overhead spending variance

$enter the fixed overhead spending variance in dollars

select an option UnfavorableNot ApplicableFavorable