Required

Prepare a very detailed manufacturing cost variance analysis (e.g., calculate price, efficiency, spending, and production volume variances.) An analysis should be done for each type of direct material (ie., string and frames should be examined separately). In addition an analysis should be done for direct labor and for fixed manufacturing overhead. Do not do a variance analysis for variable overhead costs since no allocation base is given. All variances should be marked with either an F for favorable or U for unfavorable.

A company manufactures tennis rackets and uses a standard costing system. The master budget income statement for April was based on the expectation of producing 20,000 units and selling 16,800 units. The budgeted sales price was $38 per unit, and total budgeted fixed selling and administrative costs were $170,200. There are no variable selling and administrative costs in this firm. Standard manufacturing costs used in determining costs under the master budget are listed below in Exhibit A. Exhibit A* Per Racket Raw material: Frame: 1.02 frames at $8.00 per frame Stringing materials: 22 feet at $0.13 per foot Direct labor: 0.3 hours at $14.40 per hour Variable overhead Fixed overhead Total standard cost per tennis racket $ 8.16 2.86 4.32 3.66 5.00 $24.00 *Standard costs are calculated for a production volume (denominator level of activity) of 25,000 units each month. The company actually sold 24,500 units in April. The accountants determined that the actual profits in April were $162,167. The income statement is provided in Exhibit B. Exhibit B Income Statement for April Actual $957,950 Sales: 24,500 rackets at $39.10 Standard cost of goods sold: 24,500 rackets at $24.00 Unfavorable Material variance Unfavorable Labor variance Unfavorable Variable Overhead variance Unfavorable Fixed Overhead variance Cost of goods sold after adjustment for variances Gross Margin Selling and administrative expense Operating profit 588,000 12,830 4,873 6,180 18,900 630,783 327,167 165.000 $ 162.167 Actual production data for April is given in Exhibit C. Exhibit C Direct materials purchased and used: Stringing materials Frames Labor: ($14.65 per hour) Overhead: Variable Fixed 512,000 feet at $0.11 per foot 23,000 frames at $8.65 per frame 6,820 hours $ 86.700 $128,900 22,000 rackets Production The manager of the company is unable to explain why the accountant's profits are different from the amount of profits according to the flexible budget income statement A company manufactures tennis rackets and uses a standard costing system. The master budget income statement for April was based on the expectation of producing 20,000 units and selling 16,800 units. The budgeted sales price was $38 per unit, and total budgeted fixed selling and administrative costs were $170,200. There are no variable selling and administrative costs in this firm. Standard manufacturing costs used in determining costs under the master budget are listed below in Exhibit A. Exhibit A* Per Racket Raw material: Frame: 1.02 frames at $8.00 per frame Stringing materials: 22 feet at $0.13 per foot Direct labor: 0.3 hours at $14.40 per hour Variable overhead Fixed overhead Total standard cost per tennis racket $ 8.16 2.86 4.32 3.66 5.00 $24.00 *Standard costs are calculated for a production volume (denominator level of activity) of 25,000 units each month. The company actually sold 24,500 units in April. The accountants determined that the actual profits in April were $162,167. The income statement is provided in Exhibit B. Exhibit B Income Statement for April Actual $957,950 Sales: 24,500 rackets at $39.10 Standard cost of goods sold: 24,500 rackets at $24.00 Unfavorable Material variance Unfavorable Labor variance Unfavorable Variable Overhead variance Unfavorable Fixed Overhead variance Cost of goods sold after adjustment for variances Gross Margin Selling and administrative expense Operating profit 588,000 12,830 4,873 6,180 18,900 630,783 327,167 165.000 $ 162.167 Actual production data for April is given in Exhibit C. Exhibit C Direct materials purchased and used: Stringing materials Frames Labor: ($14.65 per hour) Overhead: Variable Fixed 512,000 feet at $0.11 per foot 23,000 frames at $8.65 per frame 6,820 hours $ 86.700 $128,900 22,000 rackets Production The manager of the company is unable to explain why the accountant's profits are different from the amount of profits according to the flexible budget income statement