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 390 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			9,910			390	Favorable
Sales revenue		$2,081,100			$1,950,000			$131,100	Favorable
Less variable expenses
Direct material		593,000			576,000			17,000	Unfavorable
Direct labor		289,000			275,000			14,000	Unfavorable
Variable manufacturing overhead		218,100			217,400			700	Unfavorable
Variable selling expenses		112,500			110,000			2,500	Unfavorable
Variable administrative expenses		43,000			42,000			1,000	Unfavorable
Total variable expense		1,255,600			1,220,400			35,200	Unfavorable
Contribution margin		825,500			729,600			95,900	Favorable
Less fixed expenses
Fixed manufacturing overhead		120,000			123,500			3,500	Favorable
Fixed selling expenses		85,500			84,900			600	Unfavorable
Fixed administrative expenses		142,000			140,500			1,500	Unfavorable
Total fixed expense		347,500			348,900			(1,400)	Favorable
Operating income		$478,000			$380,700			$97,300	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: 54,500 pounds at a total of $637,650
		Direct materials used: 51,400 pounds
		Direct labor hours worked: 28,310 at a total cost of $322,985
		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		$11.70 per pound		5.00 pounds		$58.50
Direct labor		$11.50 per DLH		2.70 DLH		31.05
Variable overhead		$4.25 per MH		5 MH		21.25
Fixed overhead		$2.70 per MH		5 MH		13.50
Total standard cost per case						$124.30

(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 UnfavorableFavorableNot Applicable
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		0	Not Applicable
Direct labor efficiency variance		$?	Favorable

(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		$ ?	Favorable
Variable overhead efficiency variance		$ ?	Unfavorable

(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

$ ?

Favorable