Refer to the solution for the module problem. What do the four direct cost variances and flexible budget analysis, taken as a whole, tell you about the production process during July? What recommendations do you have for management? Hint: do not analyze the variances one by one. Try to look at them in relation to each other. (ALL I REQUIRE IS THE ANALYSIS QUESTION ANSWER)

28 10 DM DL VOH FOH 5.6 pounds 30 minutes 2 MH 2 MH TOTAL COST $5.00 pound $20.00 hour $4.50 MH $15.50 MH 9 31 $78 DMPV Standard Actual $2,162,500 $2,194,500 $32,000 U Standard price times actual pounds purchased Actual price paid Difference DMQV Standard Actual DMQV (in pounds) Standard price 85,120 90,120 5,000 U 5 Standard quantity times actual units produced Actual pounds used Difference Standard price Product -$ 25,000 U Hour worked Related payroll 7,210 hours $148,400 Units (FG) produced 15,200 Rockets DLRV Standard Actual $144,200 $148,400 $4,200 U Standard rate times actual hours worked Actual payroll Difference DLEV Standard Actual DLEV (inn hours) Standard Rate DLEV 7,600 7,210 390 F $20.00 7,800 F Standard rate times actual hours worked Actual hours worked Difference Standard rate Product $ Budget 150,000 Actual 143,500 MH Cleaning Utilities Royalties on machines $150,000 450,000 75,000 135,200 426,100 71,750 Depreciation Insurance Supervisor salary Rent 754,000 540,000 479,000 552,000 754,000 508,200 481,000 554,200 Rate Flexible Budget Budget 150,000 Rates = Cost divided by budgeted MH Actual 143,500 Variance 6,500 U MH 4.3% Budget = Rate times actual MH; fixed costs budget is given 1.00 5.8% Cleaning $ Utilities $ Royalties on machines $ 3.00 143,500 430,500 71,750 135,200 426,100 71,750 8,300 F 4,400 F F Actual = Given 1.0% 0.0% 0.50 Variance = absolute value of Budget less Actual F Depreciation Insurance Supervisor salary Rent Percentage = Variance divided by budgeted 754,000 540,000 479,000 552,000 754,000 508,200 481,000 554,200 0.0% 5.9% 0.4% 31,800 F 2,000 U 2,200 U 0.4%