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Prepare a performance report that will assist Lexi in evaluating her efforts to control production costs. (If variance is zero, select Not Applicable and enter
Prepare a performance report that will assist Lexi in evaluating her efforts to control production costs. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
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.
Irvin also found the standard cost card for a case of product.
Price/Rate/Spending Variance | Quantity/Efficiency Variance | |||
Direct materials | $ | UnfavorableFavorableNot Applicable | $ | UnfavorableFavorableNot Applicable |
Direct labor | Not ApplicableFavorableUnfavorable | UnfavorableFavorableNot Applicable | ||
Variable overhead | UnfavorableNot ApplicableFavorable | FavorableUnfavorableNot Applicable | ||
Fixed overhead | Not ApplicableFavorableUnfavorable | Not ApplicableFavorableUnfavorable | ||
Total | $ | UnfavorableFavorableNot Applicable | $ | Not ApplicableFavorableUnfavorable |
please help with"
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 340 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 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 | 10,250 | 9,910 | 340 | Favorable |
Sales revenue | $1,930,000 | $1,853,200 | $76,800 | Favorable |
Direct material | 555,951 | 545,050 | 10,901 | Unfavorable |
Direct labor | 265,241 | 257,660 | 7,581 | Unfavorable |
Variable manufacturing overhead | 282,447 | 277,480 | 4,967 | Unfavorable |
Variable selling expenses | 92,292 | 89,190 | 3,102 | Unfavorable |
Variable administrative expenses | 41,364 | 39,640 | 1,724 | Unfavorable |
Contribution margin | 692,705 | 644,180 | 48,525 | Favorable |
Fixed manufacturing overhead | 110,001 | 109,010 | 991 | Unfavorable |
Fixed selling expenses | 68,875 | 69,370 | 495 | Favorable |
Fixed administrative expenses | 128,632 | 128,830 | 198 | Favorable |
Operating income | $385,197 | $336,970 | $48,227 | Favorable |
Direct materials purchased: 101,082 pounds at a total of $555,951 | |
Direct materials used: 101,082 pounds | |
Direct labor hours worked: 26,262 at a total cost of $265,241 | |
Machine hours used: 40,581 |
Standard Price | Standard Quantity | Standard Cost | |
Direct materials | $5.5 per pound | 10 pounds | $55 |
Direct labor | $10 per DLH | 2.58 DLH | 25.80 |
Variable overhead | $7 per MH | 4 MH | 28.00 |
Fixed overhead | $2.73 per MH | 4 MH | 10.92 |
Total standard cost per case | $119.72 |
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