Regarding the variances, what kind of explanations or observation can I make?

The new incentive compensation plan was adopted. Under this plan, each three department heads are rewarded based on the performance of his or her responsibility center. Performance is measures against the companys master budget and standard cost system. The plan was the result of several meetings with Janet McKinley who is employed by the Quality Products Corporation and Vice President in charge of BTCs division of quality products and her managers. The managers argued and bargained for a plan that rewarded the managers fairly for individual contribution and achievements. McKinleys plan was intended to promote participation and teamwork and the manages accepted the new preprogram enthusiastically. The plan provides for the followings:

David Hall, the purchasing manager, will receive a bonus equal to 20% of the net materials price if the variance is favorable

Rita Smith, the production manager, will receive a bonus equal to 10% of the excess, if any of the actual net revenues (revenues minus both variable and fixed selling expenses) over master budget net revenues.

Bill Wilford, the production manager, will receive a bonus equal to 3% of the net of several variances: the efficiency (usage or quality) variances for materials, labor, and variable overhead; the labor rate variance; and the variance and fixed overhead spending variances. He will receive no bonus if his net variance is unfavorable.

Statement of Operating Income for the Year Ended June 30, 1998
		Actual	Master Budget	Master Budget Variance	F/ U	Flexible Budget	Flexible Budget Variance	F/ U
Units sold		325,556	280,000	45,556	F	325,556
Retail and catalog in units	174,965	8,573,285	11,662,000	3,088,715	U	8,573,285
Internet	105,429	4,428,018	-	(4,428,018)	F	4,428,018
Wholesale	45,162	1,445,184	1,344,000	(101,184)	F	1,445,184
Total units	325,556
Total Revenue		14,446,487	13,006,000	(1,440,487)	F	14,446,487
Variable Production Costs
Direct Materials
Acrylic pile fabric		256,422	233,324	(23,098)	U	$271,302	(14,880)	F
10-mm acrylic eye		125,637	106,400	(19,237)	U	$123,711	1,926	U
45-mm plastic joints		246,002	196,000	(50,002)	U	$227,889	18,113	U
polyester fiber filling		450,856	365,400	(85,456)	U	$424,851	26,005	U
woven label		16,422	14,000	(2,422)	U	$16,278	144	U
designer box		69,488	67,200	(2,288)	U	$78,133	(8,645)	F
accessories		66,013	33,600	(32,413)	U	$39,067	26,946	U
Total Direct Labor Materials		1,230,840	1,015,924	(214,916)	U	$ 1,181,231	49,609	U
Direct labor		3,668,305	2,688,000	(980,305)	U	3,125,338	542,967	U
variable overhead		1,725,665	1,046,304	(679,361)	U	1,216,538	509,127	U
Total variable production costs		6,624,810	4,750,228	(1,874,582)	U	5,523,091	1,101,719	U
Variable Selling expenses		1,859,594	1,218,280	(641,314)		1,416,494	443,100	U
Total variable expenses		8,484,404	5,968,508	(7,266,124)	U	6,939,585	1,544,819	U
Contribution Margin		5,962,083	7,037,492	7,037,492	U	7,506,902	(1,544,819)	U
Fixed costs
manufacturing overhead		658,897	661,920	3,023	F	769,614	(110,717)	F
selling expenses		5,023,192	4,463,000	(560,192)	U	4,463,000	560,192	U
administrative expenses		1,123,739	1,124,000	261	F	1,124,000	(261)	F
total fixed costs		6,805,828	6,248,920	(556,908)	U	6,356,614	449,214	U
Operating Income		(843,745)	788,572	7,594,400	U	1,150,272	(1,994,017)	F

Price and Efficiency Variance
	Actual Costs	Price Variance		Actual input, standard Prices	Efficiency Variance		Flexible Budget
Direct Materials
Acrylic pile fabric	256,422	20,428	F	$276,850	($5,548)	U	$271,302
10-mm acrylic eye	125,637	-		$125,637	($1,926)	U	$123,711
45-mm plastic joints	$246,002	25,181	F	$271,183	($43,294)	U	$227,889
polyester fiber filling	450,856	48,183	F	$499,039	($74,188)	U	$424,851
woven label	16,422	-		16,422	($145)	U	$16,278
designer box	69,488	6,317	F	$75,805	$2,328	F	$78,133
accessories	66,013	(26,946)	U	$41,346	$0		$39,067
Total Direct materials	1,230,840	73,164	F	$1,306,283	($122,772)	U	$1,181,232
Direct Labor	3,668,305	($76,329)	U	$3,591,976	($466,638)	U	$3,125,338
Variable Overhead	1,725,665	($327,488)	U	$1,398,177	($181,639)	U	$1,216,538
Total Variable Cost	6,624,811	(330,654)	U	6,296,435	(771,049)	U	5,523,107

Sales
	Units	Actual	Master Budget	Master Budget Variance	Flexible Budget (Actual Sales Mix)	Flexible Budget Variance (Budget Sales Mix)	Sales Mix Variance	Sales Volume Variance
Unit Sold		325,556	280,000	45,556	325,556	325,556	0	45,556
Retail and Catalog	174,965	8,573,285	11,662,000	3,088,715	8,573,285	13,559,574	-4,986,289	1,897,407
Internet	105,429	4,428,018	-	(4,428,018)	4,428,018	0	4,428,018	0
Wholesale	45,162	1,445,184	1,344,000	(101,184)	1,445,184	1,562,656	-117,472	218,669
Total revenue		14,446,487	13,006,000	-1,440,487	14,446,487	15,122,230	-675,743	2,116,076