Question
Required: 1. Prepare a new contribution report for April, in which: The static budget column in the contribution report is replaced with a flexible budget
Required: 1. Prepare a new contribution report for April, in which: The static budget column in the contribution report is replaced with a flexible budget column. The variances in the contribution report are recomputed as the difference between the flexible budget and actual columns. 2. What is the total contribution margin in the flexible budget column of the new report prepared for requirement 1? 3. Explain (i.e., interpret) the meaning of the total contribution margin in the flexible budget column of the new report prepared for requirement 1. 4. What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for requirement 1? Explain this total contribution margin variance by computing the following variances. (Assume that all materials are used in the month of purchase.) a. Direct-material price variance. b. Direct-material quantity variance. c. Direct-labor rate variance. d. Direct-labor efficiency variance. e. Variable-overhead spending variance. f. Variable-overhead efficiency variance. g. Sales-price variance. 5. a. Explain the problems that might arise in using direct-labor hours as the basis for applying overhead. b. How might activity-based costing (ABC) solve the problems described in requirement 5a?
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