The 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 the 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.

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.

The actual production data for April is given in Exhibit C.

Required:

Prepare a very detailed manufacturing cost variance analysis (e.g., calculate the 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.
 
 

Exhibit A* 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 Per 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.