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 290 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.

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: 101,592 pounds at a total of $558,756
		Direct materials used: 101,592 pounds
		Direct labor hours worked: 26,394 at a total cost of $266,579
		Machine hours used: 40,786 Irvin also found the standard cost card for a case of product. Calculate the direct material price variance and direct material quantity variance for the month. Calculate the direct labor rate variance and direct labor efficiency variance for the month. Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. Calculate the fixed overhead spending variance for the month. Prepare a performance report that will assist Lexi in evaluating her efforts to control production costs. Based on your review of the performance report you prepared, do you think Lexi did a good job of controlling production expenses during the month?

Actual Budget 9,960 $1,862,500 Variance Cases produced and sold Sales revenue Less variable expenses 10,250 290 Favorable $1,939,700 $77,200 Favorable Direct material Direct labor Variable manufacturing overhead Variable selling expenses Variable administrative expenses 558,756 266,579 283,872 92,757 41,573 1,243,537 696,163 547,800 258,960 278,880 89,640 39,840 1,215,120 647,380 10,956 Unfavorable 7,619 Unfavorable 4,992 Unfavorable 3,117 Unfavorable 1,733 Unfavorable 28,417 Unfavorable Total variable expense Contribution margin Less fixed expenses 48,783 Favorable Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses 110,556 69,222 129,281 309,059 $387,104 109,560 69,720 129,480 308,760 $338,620 996 Unfavorable (498 Favorable) (199 Favorable) Total fixed expense 299 Unfavorable Operating income $48,484 Favorable