Ruth May, Inc. designs and manufacturers fleece quarter zip jackets.

1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? 2. Comment on the May 2017 results. Would you continue the "experiment" of using the new material? 400 12 yards at $1.20 per yard - $14.40 1.6 hours at $8.40 per hour = $13.44 Static Budget Number of jacket lots (1 lot = 1 dozen) Per Lot of Jackets: Direct materials Direct manufacturing labor Actual Results Number of jacket lots sold Total Direct Inputs: Direct materials Direct manufacturing labor 425 5,950 yards at $1.40 per yard = $8,330.00 595 hours at $8.50 per hour $5,057.50 Ruth May has a policy of analyzing all input variances when they add up to more than 8% of the total cost of materials and labor in the flexible budget and this is true in May 2017 The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they leamed to work with it. For now, the standards are fine." Donna May, Inc. designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand name outdoor Outfitters in icts of one dozen. Donna May's May 2017 static budget and actual results for direct inputs are as follows: (Click the icon to view the data.) Click the icon to view additional information.) Read the requirements x x A variance is the difference between actual results and expected (budgeted) performance. Variance analysis contributes in many ways to making the five-ster decision-making process more effective. It allows managers to evaluate performance and learn by providing a framework for correctly assessing current performance. In turn, managers take corrective actions to ensure that decisions are implemented correctly and that previously budgeted results are in fact attained. Variances also enable managers to generate more informed predictions about the future, and thereby improve the quality of the five-step decision-making process. Requirement 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing tabor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? Let's begin by calculating the following costs: actual input at budgeted price. The actual input at budgeted price cost will help in calculating the price and efficiency variances. The difference between the actual cost and this cost is the price variance and the difference between the flexible budget cost and this cost is the efficiency variance. (Enter budgeted price and cost to the nearest cent.) Actual input Actual input Budgeted price = at budgeted price Direct materials yards Direct manufacturing labor hours The price variance is the difference between the actual price and the budgeted price, multiplied by the actual input quantity, such as direct materials purchased or used. A favorable price variance will occur when actual costs are lower than budgeted costs and an unfavorable price variance occurs when actual costs are higher Calculate DonnaMay's price variance. Label each variance as favorable (F) or unfavorable (U). Actual Price Actual input May 2017 results Variance at budgeted price Units 475 lots (1) Direct materials $ 9,120.00 (2) Direct labor $ 4.758.60 (3) Total variance Now let's calculate the flexible budget. A flexible budget calculates budgeted costs based on the actual output in the budget period. The flexible budget is prepared at the end of the period, after the actual output is known. The flexible budget is the hypothetical budget that DonnaMay would have prepared at the start of the budget period if it had correctly forecast the actual output of 475 T-shirt fots (units). The budgeted price per lot is the number of yards per tot times the budgeted price per yard. Refer to the information given and input these amounts. (Round your answers to the nearest cent.) Actual output (lots) * Budgeted price per lot - Flexible budget Direct materials 475 x Direct manufacturing labor 475 Now we can calculate DonnaMay's efficiency variance for May 2017. The efficiency variance is the difference between the flexible budget and actual input at budgeted price". A favorable efficiency variance would mean the company used less inputs to produce the T-shirts than they had budgeted and an unfavorable efficiency variance would mean the company used more inputs to produce the T-shirts than they had budgeted X May 2017 M at borted price Die www Director spending a budget conforme a Donati Dominee w 5 Rent 2. 2017 ve Dolly regime There were the heat me when + Dovana w Perlas achete Director en Total Direct De 7800 1.6.0 2. More Derrallay has spocy prawy New 2017 The Calle de ander wer price and we et de verander of the collected 4. Denon y the promo 2 Malengo May 2017 1 DO 00 OF OU no Ou OF OU OF OU OU na