Sandy Smith is the kitchen manager for UP Dining Concepts DBA, maker of Eds Iguana Pasties UP Dining Concepts got its start when Ed Baker, a snowbird from Michigans UP, tried Iguana meat during a winter stayover in South Florida He was so impressed that he bought a pound of the meat at a farmers market, froze it, and took it back to the UP to share with his friends He didnt have quite enough to make it a meal, so he served it in a pastie (pronounced Pass T)a Northern Michigan traditional dish Over time it became his tradition to serve Iguana pasties each spring when he returned from the South Eventually, he built a kiosk out of a shed mounted on a trailer and started having his grandkids sell Eds Iguana Pasties at fairs and other summer events to help them pay for college Within a few years the business had expanded enough to open a central kitchen to prepare pasties Because of health regulations, the pasties are prepared in a central kitchen managed by Sandy Smith Sandy is a great cook and longtime UP resident She keeps things lively in the kitchen by telling UP jokes, eh When things are too busy in the kitchen for her, she recruits relatives to help her out Sometimes they arent as precise in preparing the pasties as she would like, but when the orders come in, the pasties must be made Up until now, Ed hasnt worried too much about numbers He knows a good pastie, and his emphasis has always been on the customer experience and having a fun time But this summer his grandkids decide to put their college accounting to work and suggest that he try using variance analysis It seemed like a good idea to use some kind of system to know if the pasties are being prepared properly, and the grandkids are persistent Ed sits down with his budding management accountants and puts together a plan A few day later, this is what they have The June budget , based on standard costs Budgeted Production 2,500 pasties Direct materials Dough$275 (0 25 Lbs $0 44 Lb x 2,500) Filling spices$900 (0 75 Lbs $0 48 Lb x 2,500) Iguana meat $5,000 (1 16 Lb $32 00 Lb x 2,500) Direct Labor $2,250 (0 05 DLH $18 00 Hr x 2,500) VOH $1,875 (VOH allocated at $15 00 per DLH x 125 DLH) At the end of the month, Daves accountant sends him the following financial results (along with a bill for services) Actual June performance of the central pastie kitchen Actual Production 2,400 pasties Direct materials Dough$302 40 (0 30 Lbs $0 42 Lb x 2,400) Filling spices$1,008 00 (0 70 Lbs $0 60 Lb x 2,400) Iguana meat $5,241 60 ( 91 oz $2 40 oz x 2,400) Direct Labor $2,244 00 (0 055 DLH $17 00 Hr x 2,400) VOH $1,893 00 Dave and his grandkids sit down and compare the actual numbers to the budget, and this is what they see UP Dining Concepts Kitchen Performance Report For the Month of June Actual Budget Variance Direct Materials Dough $302 40 Filling spices $1,008 00 Iguana meat $5,241 60 Dough $275 00 Filling spices $900 00 Iguana meat $5,000 00 $ 27 40 U $ 108 00 U $ 241 60 U Direct labor $2,244 00 $2,250 00 $ 6 00 F Variable OH $1,893 00 $1,875 00 $ 18 00 U Total $10,689 00 $10,300 00 $ 389 00 U Ed takes a look at the numbers and shrugs The actual results are only about 4 over budget, and most of that is in the ingredients Everything looks pretty good to me he says Is Eds analysis correct Required As Eds trusted business advisor, please draft a memo addressed to Ed with your analysis of the current performance In your memo, answer the following questions Include a financial analysis (including the variance analysis in Requirement B and any other important calculations) as an attached file or at the end of the memo, with all your calculations Does the variance report reflect the actual performance of Sandy Smith and the central kitchen Why or why not Prepare a more useful variance analysis, and include it with your financial analysis Your analysis should include the total budget variance as well as its price rate spending and quantity efficiency component The following format might be helpful Account Actual cost Flexible budget Total Budget Variance Price Rate Variance Qty Efficiency Variance Dough $302 40 Filling spices $1,008 00 Iguana Meat $5,241 60 Direct labor $2,244 00 Variable OH $1,893 00 Total $10,689 00 In memo, summarize your findings from the financial analysis prepared for Requirement B (i e , what does your report suggest about Sandys performance in the centralized kitchen )

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Sandy Smith is the kitchen manager for UP Dining Concepts DBA, maker of Eds Iguana Pasties. UP Dining Concepts got its start when Ed Baker,

Sandy Smith is the kitchen manager for UP Dining Concepts DBA, maker of Eds Iguana Pasties. UP Dining Concepts got its start when Ed Baker, a snowbird from Michigans UP, tried Iguana meat during a winter stayover in South Florida. He was so impressed that he bought a pound of the meat at a farmers market, froze it, and took it back to the UP to share with his friends. He didnt have quite enough to make it a meal, so he served it in a pastie (pronounced Pass-T)a Northern Michigan traditional dish. Over time it became his tradition to serve Iguana pasties each spring when he returned from the South. Eventually, he built a kiosk out of a shed mounted on a trailer and started having his grandkids sell Eds Iguana Pasties at fairs and other summer events to help them pay for college. Within a few years the business had expanded enough to open a central kitchen to prepare pasties.

Because of health regulations, the pasties are prepared in a central kitchen managed by Sandy Smith. Sandy is a great cook and longtime UP resident. She keeps things lively in the kitchen by telling UP jokes, eh? When things are too busy in the kitchen for her, she recruits relatives to help her out. Sometimes they arent as precise in preparing the pasties as she would like, but when the orders come in, the pasties must be made.

Up until now, Ed hasnt worried too much about numbers. He knows a good pastie, and his emphasis has always been on the customer experience and having a fun time. But this summer his grandkids decide to put their college accounting to work and suggest that he try using variance analysis. It seemed like a good idea to use some kind of system to know if the pasties are being prepared properly, and the grandkids are persistent. Ed sits down with his budding management accountants and puts together a plan. A few day later, this is what they have:

The June budget, based on standard costs:

Budgeted Production	2,500 pasties
Direct materials	Dough$275 (0.25 Lbs. @ $0.44/Lb. x 2,500) Filling/spices$900 (0.75 Lbs. @ $0.48/Lb. x 2,500) Iguana meat--$5,000 (1/16 Lb. @ $32.00/Lb. x 2,500)
Direct Labor	$2,250 (0.05 DLH@ $18.00/Hr. x 2,500)
VOH	$1,875 (VOH allocated at $15.00 per DLH x 125 DLH)

At the end of the month, Daves accountant sends him the following financial results (along with a bill for services):

Actual June performanceof the central pastie kitchen:

Actual Production	2,400 pasties
Direct materials	Dough$302.40 (0.30 Lbs. @ $0.42/Lb. x 2,400) Filling/spices$1,008.00 (0.70 Lbs. @ $0.60/Lb. x 2,400) Iguana meat--$5,241.60 (.91 oz. @ $2.40/oz. x 2,400)
Direct Labor	$2,244.00 (0.055 DLH@ $17.00/Hr. x 2,400)
VOH	$1,893.00

Dave and his grandkids sit down and compare the actual numbers to the budget, and this is what they see:

UP Dining Concepts
Kitchen Performance Report
For the Month of June
	Actual	Budget	Variance
Direct Materials	Dough--$302.40 Filling/spices-- $1,008.00 Iguana meat--$5,241.60	Dough--$275.00 Filling/spices-- $900.00 Iguana meat--$5,000.00	$ 27.40 U $ 108.00 U $ 241.60 U
Direct labor	$2,244.00	$2,250.00	$ 6.00 F
Variable OH	$1,893.00	$1,875.00	$ 18.00 U
Total	$10,689.00	$10,300.00	$ 389.00 U

Ed takes a look at the numbers and shrugs. The actual results are only about 4% over budget, and most of that is in the ingredients. Everything looks pretty good to me he says.

Is Eds analysis correct?

Required:

As Eds trusted business advisor, please draft a memo addressed to Ed with your analysis of the current performance. In your memo, answer the following questions. Include a financial analysis (including the variance analysis in Requirement B and any other important calculations) as an attached file or at the end of the memo, with all your calculations.

Does the variance report reflect the actual performance of Sandy Smith and the central kitchen? Why or why not?

Prepare a more useful variance analysis, and include it with your financial analysis. Your analysis should include the total budget variance as well as its price/rate/spending and quantity/efficiency component. The following format might be helpful:

Account	Actual cost	Flexible budget	Total Budget Variance	Price/Rate Variance	Qty/Efficiency Variance
Dough	$302.40
Filling/spices	$1,008.00
Iguana Meat	$5,241.60
Direct labor	$2,244.00
Variable OH	$1,893.00
Total	$10,689.00

In memo, summarize your findings from the financial analysis prepared for Requirement B (i.e., what does your report suggest about Sandys performance in the centralized kitchen?).