Need help with this project. Explaining where I need to start or anything would be helpful.
Instructions 1. Analyze each variance on the operating income reconciliation schedule on pg. 1. Your analysis should be supported by calculations. Explain why the variances occurred based on Gingerbread Dollhouse's information and business model. You should analyze the company's sales mix, direct and indirect manufacturing costs, as well as general selling & administrative expenses. You need to use the detailed information on pg. 2. All standard and actual costs should be considered in support of your analysis. 2. Based on your analysis, prepare a one page professional memo with three recommendations for Susan Smith on how to improve Gingerbread Dollhouse's performance. In 1995, RD. Smith, established Smith's Gingerbread Dollhouses Inc. The company assembles dollhouses which are sold in the United States. After her father-in-law's retirement in 2017, Susan Smith assumed control of the company. In 2018, Susan expected the company's operating income to increase because the company no longer had to pay R.D.'s salary of $125,000. Instead, the company's operating income decreased. As Susan's accountant, you prepared operating income reconciliation from 2017 to 2018. As you are getting ready for a meeting with her, you need to explain the reasons why operating income decreased. Based on what you have learned (and still learning) this semester, evaluate the variances below. Gingerbread Dollhouses Inc. Operating Income Reconciliation 2017 - 2018 Difference Operating Income 2017 S 1,857,600 Total Sales Mix Variance (591,600) Manufacturing Variances: Direct Materials Variance Price $056,000) Efciency (22,000) Direct Labor Variance Rate (3 7,850) Efciency (2,775) Variable Overhead Variance Spending (30,600} Total Manufacturing Variances $049,225) Selling & General Administration 125 000 Operating Income 2018 $1,041,775 Gingerbread Dollhouses Inc. Summary of Standard Costs Deluxe Simple Summary of Standard Costs Victorian Victorian Assembly kit per dollhouse S 400 S 200 Direct labor hours per dollhouse 3 Direct labor rate per hour* S 25 S CT Variable overhead rate per dollhouse* S 35\\ S 35 Sales Price 2017 2018 Deluxe Victorian S 900 S 900 Simple Victorian S 350 S 350 Sales Mix Percent 2017 2018 Deluxe Victorian 80% 50% Simple Victorian 20% 50% Total Assembled & Sold 6, 800 6. 800 Gingerbread Dollhouse's Inc . Summary of Actual Costs Deluxe Victorian* 2017 2018 Assembly kits :" Used 5. 440 3, 425 Price per kit S 400 S 500 Direct labor hours 16, 320 10, 275 Direct labor rate per hour* S 25 S 27 Variable overhead per dollhouse 35 38 Simple Victorian 2017 2018 Assembly kits :` Used 1 , 360 3 , 460 Price per kit S 200 S 175 Direct labor hours 1 , 360 3, 460 Direct labor rate per hour S 15 S 20 Variable overhead per dollhouse S 35 S 41 Director salaries S 400, 000\\\\ $ 275, 000
