*Problem 6-30 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 350 cases off the production line before the end of the month. But as she glanced over the rest of numbers, Lexi couldn't 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. Actual 10,250 $1,928,000 Budget 9,900 $1,851,300 Variance 350 Favorable $76,700 Favorable Cases produced and sold Sales revenue Less variable expenses Direct material Direct labor Variable manufacturing overhead Variable selling expenses Variable administrative expenses Total variable expense Contribution margin Less fixed expenses Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses Total fixed expense Operating income 555,390 264,974 282,162 92,199 41,323 1,236,048 691,952 544,500 257,400 277,200 89,100 39,600 1,207,800 643,500 10,890 Unfavorable 7,574 Unfavorable 4,962 Unfavorable 3,099 Unfavorable 1,723 Unfavorable 28,248 Unfavorable 48,452 Favorable 109,890 68,805 128,502 307,197 $384,755 108,900 69,300 128,700 306,900 $336,600 990 Unfavorable (495 Favorable) (198 Favorable) 297 Unfavorable $48,155 Favorable Lexi picked up the phone and called Irvin. "Irvin, I don't 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 what's going on?" "Let me look into it and I'll get back to you," Irvin replied. Irvin gathered the following additional information about the month's performance. Direct materials purchased: 100,980 pounds at a total of $555,390 Direct materials used: 100,980 pounds Direct labor hours worked: 26,235 at a total cost of $264,974 Machine hours used: 40,541 Irvin also found the standard cost card for a case of product. Direct materials Standard Price $5.50 per pound $10 per DLH $7 per MH $2.72 per MH Standard Quantity 10 pounds 2.57 DLH Direct labor Standard Cost $55 25.70 28.00 10.88 $119.58 Variable overhead 4 MH Fixed overhead 4 MH Total standard cost per case (a-b) Calculate the direct material price variance and direct material quantity variance for the month. (If variance is zero, select "Not Applicable" and enter o for the amounts.) Direct material price variance Direct material quantity variance $ (c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to 0 decimal places, e.g. 1,525. If variance is zero, select "Not Applicable" and enter o for the amounts.) Direct labor rate variance Direct labor efficiency variance $ (e-f) Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. (If variance is zero, select "Not Applicable" and enter o for the amounts.) Variable overhead spending variance $ Variable overhead efficiency variance $ (g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter o for the amounts.) Fixed overhead spending variance $ 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 o for the amounts.) Price/Rate/Spending Variance Quantity/Efficiency Variance Direct materials $ Direct labor Variable overhead Fixed overhead Total 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
