Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question IVariance analysis (40 points) SPRINT is clothing company that sells different types of sports clothing. To produce clothing. SPRINT needs to buy materials. In
Question IVariance analysis (40 points) SPRINT is clothing company that sells different types of sports clothing. To produce clothing. SPRINT needs to buy materials. In addition to material costs. SPRINT must put in labor hours. Finally. there are fixed overhead costsi.e., the rent for their buildings, for which SPRINT signs a oneyear contract at the beginning of each year. For 2020. SPRINT expected the rent to amount to 5550.000. Regarding materials. past data indicates that: (1} materials {e.g.. polyester} cost on average 82 per kilogram (i.e., 1.000 gram]; and t2) labor costs equal on average $15 per hour. The amount of polyester and number of labor hours required to produce sports clothing depend on the type of clothing. Therefore. the selling price likewise differs for each type of sports clothing. The table below displays the expected nttmbers per type of sports clothing: Shirt Legging Tank top Materials {in grants} 150 200 100 Labor [in minutes) 80 90 60 Selling price (in SE) 30 50 20 Expected sales {in it] 50.000 40.000 35.000 At the end of 2020, it tttrns out that the actual numbers for SPRINT are as follows: Shirt Legginu Tank top Actual sales (in $} 1,620,000 2.160.000 585.000 Actual sales (in #} 60,000 48,000 33,250 Actual material costs [in S} 18.000 19.200 6.650 Actual labor costs (in 13) 1.200000 1.188.000 448.8?5 Furthermore. it turns out that the materials costs per kilogram, labor costs per hour and xed costs were indeed correctly budgeted and, thus. are $2. $15 and $750,000, respectively. 1. Calculate and interpret the following variances. In addition, for each variance, provide a potential economic explanation for its result: a. Sales price contribution variance b. Sales mix contribution variance c. Sales quantity contribution variance d. Fixed costs variance Points: 40, word limit: 450. Your answer goes here
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started