Question
Papaya Partners is a distributor of papayas. They purchase papayas from individual growers and package them in 10-pound cartons for delivery to their various customers,
Papaya Partners is a distributor of papayas. They purchase papayas from individual growers and package them in 10-pound cartons for delivery to their various customers, generally supermarkets. Last month, they budgeted to sell $500,000 worth of cartons at a price of $25 each. Actual sales met a budget of $500,000 at $25 per carton.
Management has received cost information based on actual performance and needs to understand the drivers of the overall variance from the budget. They have asked you, as an analyst in their management accounting department, to calculate and explain the variances. The following data has been provided:
Budget | |
---|---|
Cost of fruit @ 10 pounds per carton | $ 200,000 |
Cost of packaging @ 1 pound per carton | $ 10,000 |
Labor costs @ .5 hourse per carton | $ 90,000 |
Total Cost | $ 300,000 |
Actual | |
Cost of fruit @ 10 pounds per carton | $ 244,200 |
Cost of packaging @ .55 pound per carton | $ 11,000 |
Labor costs @ .75 hourse per carton | $ 150,000 |
Total Cost | $ 405,200 |
Unfavorable variance | $105,200.00 |
Specifically, management needs to know the:
- Standard cost per unit (carton)
- Actual cost per unit
- Direct materials price variances
- Direct materials usage variances
- Direct labor rate variance
- Direct labor efficiency variance
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