The Financials After leaving the Colonel's office, Terry prepared a comparative variable costing income statement for the last two quarters. Amboy Specialty Foods Current Last Quarter Quarter Variance F/U # of Cases Sold per Case 115,000 per Case 100,000 Sales Revenue $ 26.90 $3,093,500 $26.00 $2,600,000 $ 493,500 F Less: Var Cost of Goods Sold Direct Materials-Block Cheese $21.78 $2,504,700 $18.00 $1,800,000 $ (704,700) U $0.50 $ 57,500 $0.30 $ 34,500 $1.83 Variable OH $3.35 Net Operating Income Direct Materials--Oil etc Direct Materials--Packaging Direct Labor Contribution Margin Selling and Administrative Costs ($0.86) $ (98,900) $2.70 $270,000 $ (368,900) U 165,000 150,000 (15,000) U $ (263,900) $ 120,000 $ (383,900) U $0.50 $ 50,000 $ (7,500) U $0.30 $30,000 $ (4,500) U 210,450 $1.50 150,000 (60,450) U 385,250 $3.00 300,000 (85,250) U Terry also generated a report of input costs for the two quarters. Current Quarter Last Quarter Cost Inputs Direct Materials - Block Cheese Pounds of Cheese per Case 6.6 6.0 Pounds of Block Cheese Purchased & Used 759,000 600,000 Cost per Pound of Block Cheese $3.30 $3.00 Direct Materials - Other Oil, cheese powder, spices & preservatives per Case $0.50 $0.50 Packaging per Case $0.30 $0.30 Direct Labor Hours per Case 0.12 0.10 Direct Labor Rate per Hour $15.25 $15.00 Variable Manufacturing Overhead per Case $3.35 $3.00 Selling and General Administration $165,000 $150,000 2 Variance Analysis Table Method Volume Spending Last Quarter Variance Flexible Budget Variance Actual Results Total Variance # of Cases 100,000 Sales Revenue $ 2,600,000 $390,000 Direct Materials-Block Cheese $ 1,800,000 S (270,000) 115,000 $2,990,000 $ $2,070,000 115,000 103,500 ($434,700) $ $ 3,093,500 $ 493,500 F 2,504,700 $ (704,700) U Direct Materials-Oil etc $ 50,000 $ (7,500) $57,500 $0 $ 57,500 $ (7,500) U Direct Materials-Packaging $ 30,000 S (4,500) $34,500 $0 $ 34,500 $ (4,500) U Direct Labor $ 150,000 S (22,500) Variable OH $ 300,000 $ (45,000) $172,500 $345,000 ($37,950) $ 210,450 $ (60,450) U cost SG&A $ 150,000 $ $150,000 ($40,250) $ ($15,000) $ 385,250 $ (85,250) U 165,000 $ (15,000) U Net Operating Income $ 120,000 $ (263,900) $ (383,900) 1. Complete the Flexible Budget using Standard Costs from the case 2. Find the Volume Variance for Direct Materials (Cheese) and Direct Labor 3. Find the Spending Variance for Direct Materials (Cheese) and Direct Labor 4. Using the Spending Variance, separate into: (a) Price and Quantity Variances for Direct Materials (b) Rate and Efficiency Variances for Direct Labor Direct Materials SP = SQ= AP = AQ= Direct Labor SR= SH= AR= AH = 690,000 Price (SP-AP) X AQ Rate (SR-AR) XAH Direct Materials Spending ($434,700) Direct Labor Spending Usage (SQ - AQ) x SP Efficiency (SH-AH) x SR standard cost card - materials (cheese) amount 6 pounds per case 3 per pound $18.00 per case Standard cost card-labor amount cost 0.1 hours per case $15.00 per hour $1.50 per case