PROBLEM

1: . E l . Usually, premium line of ice creams ingredients consism of 10% to 16% milk fat, 9% to 12% milk solids [caseins and whey,' proteins}, and carbohydrates [lactose] found in milk, 12% to 16% combination of sucrose and glucose-based corn syrup sweeteners, 0.2 % to 0.5% stabilizers and emulsiers, and 55% to 64% water which comes from the milk or ether ingredients. Focusing on the Classic Product line, Nestle maintains 16% milk Fat for texture, flavor, and creaminess. Assume the following production-related data for the demand of 25,000 units for the Classics Product Line: Sta nda rd to s t Actual Cost Direct materials Standard: 16 units of milk fat P 153.50 Actual: 15.9? units of milk fat 2' 153.52 Direct labor Standard: 0.65 hour 260 per hour 44.20 Actual: 0.63 hour F20 per hour +1.10 1liariable manufacturing overhead Standard: F35 per DLH 22.25 Actual: F36 per DLH 22.60 Total Cost per unit of Bella Doll 2" 220.65 1" 220.30 Direct Materials: Due to increasing prices of milk, Nestle decided to slightly cut down the milkfat content of the Classics Product Line to 15.6\"] units. 1With the international standard of 10 to 16 units, 15.90 is still well above it. Direct labor: Human Resources Department 1was able to hire personnel willing to work for F20 per hour but was able to produce a unit of the product in 0.63 hours. Product ! units I Price Mate rial s unit Classics 25,000 2' 4-20 2 153.50 0.65 Layers 42,000 4-00 200.50 0.05 Extraas 40,000 250 100.00 0.00 Ruby 35,000 450 202.20 1.20 Divine 50,000 540 160.60 0.20 The following additional information is available: a. The production process is machine intensive with adherence to strict sanitation standards and internationally accepted technical process ow For ice cream manufacturing. b. For ice cream production the company's plant has a capacity of 100,000 direct laborshours per year on a single-shift basis. The company's present employees and equipment can produce all ve products. c. The direct labor rate ofF'60.00 per hour is expected to remain unchanged during the coming year. Variable overhead costs are 1335.00 per direct labor hour. d. All of the company's nonmanufacturing costs are xed e. The company's nished goods inventory is negligible and can be ignored. f. Fixed Costs total 025,260,000 per year. g. Net operating income for the year amounted to F2 1,345,030 Variable Overhead: Hired personnel (operating machinery, using factory supplies, and maintaining the operations of the plant) managed overhead at an average of P36 per direct labor hour. Requirement: (9) Compute and write an analysis of the variances: Materials : Price, Quantity or Usage, Spending Variance Labor & Overhead: Rate, Efficiency, Spending Variance (10) How much is the total spending variance of the period for the Classics Product Line? What are the possible causes of such materials, labor, and variable manufacturing overhead variances? Based on your variance analysis, what can you recommend