Variance and Performance Evaluations: Jill is the founder and CEO of the apparel manufacturer "Dummy." She strongly believes in accountability and pay-for-performance. One of the lessons she took away from business school was to have clearly defined standards, or budgets, in place against which to compare actual costs and revenues so as to evaluate the performance of her coworkers. The key functional managers who receive variable compensation at this point are Stan (marketing manager), Mary (operations manager), and Dan (purchasing manager).

In January, Jill has prepared a budget on the basis of 200,000 expected pairs of jeans to be made and sold. This budget was based on an expected unit sales price per pair of jeans of $40, expected variable DM costs of $12, expected variable DL of $5, and expected variable OH of $10. The expected fixed cost was $1,500,000, consisting of $1MM fixed OH and $500K fixed marketing costs.

At the end of the year, actual sales turn out to be 210,000 units, i.e., 5% higher than expected. Yet Jill was unpleasantly surprised to find actual operating income to be lower than budgeted:

Budgeted (Jan 01) and Actual (Dec 12) Data Budget Actual Output units 200,000 210,000 Per unit Total Total Revenues 40 8,000,000 8,250,000 Variable costs: DM 12 2,400,000 2,535,000 DL 5 1,000,000 1,037,000 Var OH 10 2,000,000 2,089,000 Total var costs 27 5,400,000 5,661,000 Contribu margin 13 2,600,000 2,589,000 Fixed costs: Fixed OH 1,000,000 1,010,000 Fixed marketing 500,000 500,000 Total fixed costs 1,500,000 1,510,000 OI 1,100,000 1,079,000Required: 1. Fill in Flexible budget, Sales-volume variance (SVV), and Flexible-budget variance (FBV) for Revenue, DM, DL, in the table below, and indicate your variance to be either Favorable(F) or Unfavorable (U): note: you're not required to answer Var OH Static Budget (for 200,000 Actual (for units) SVV Flexible Budget FBV 210,000 units) Per unit Total Total Revenues 40 8,000,000 8,250,000 Variable costs: DM 12 2,400,000 2,535,000 DL 1,000,000 1,037,000 Var OH 10 2,000,000 2,089,000 2. What is the average purchase price per roll of fabric over the course of the year? 3. Calculate the Price variance (PV) and Efficiency variance (EV) for DM. 4. The purchasing division manager Dan's job is to buy direct materials for the company. How much is Dan's contribution (in $ amount) to the total variance of the firm's operation income