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roblem 6-31 (Part Level Submission) ressure Reducers, Inc. produces and sells lumbar support cushions for office chairs using a special foam that molds to a
roblem 6-31 (Part Level Submission) ressure Reducers, Inc. produces and sells lumbar support cushions for office chairs using a special foam that molds to a person's back. Since all products are made to order, the only inventory the compan aintains is raw materials. Thus, all costs of production are recognized in the period in which they are incurred. The following annual report was prepared from the company's accounting records: Actual Budget Variance 670 Unfavorable nits sold ales revenue ost of goods sold ross margin elling and administrative expenses perating income 14,500 15,170 $2,898,510 $2,927,810 $29,300 Unfavorable 22,900 Favorable 2,076,450 2,099,350 828,460 290,000 $533,430 $538,460 6,400 Unfavorable 1,370 Favorable $5,030 Unfavorable 822,060 288,630 he following fixed costs are included in these amounts. Actual Budget ost of goods sold elling and administrative expenses $195,700 $203,100 138,300 138,300 ank Martinez, Pressure Reducers' CFO, used the following standard cost card in preparing the budget and thought he had done a good job estimating production and sales. He wonders why the variable co oods sold deviated from that budget. Total Cost $50 40 35 $125 Standard Quantity Standard Price $5 per yard $8 per DLH $7 per DLH per Unit per Unit irect material irect labor ariable overhead 10 yards 5 hours 5 hours
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