Zimmerman Inc. manufactures a single product, CXW. Zimmerman uses budgets and standards in its planning and control functions. Zimmerman makes use of its standards in order to derive their budgeted cost per unit. For example, Exhibit A provides information on the budgeted varia direct material costs for the planning budget income statement, the S12 budgeted material cost per unit of CXW would be used in the calculation ble costs per unit. When determining Exhibit A Budgeted (Standard) Variable Costs Per Unit of CXW $12 15 Raw material: 3 pounds at $4 per pound Direct labor: 0.75 direct labor hours at $20 per hour Variable overhead: 0.75 direct labor hours at $12 per hour $36 Total variable budgeted (standard) cost per CXW The standards for fixed manufacturing overhead costs are: 0.75 direct labor hours at $8 per hour. The standard fixed manufacturing overhead cost per hour is calculated based on a denominator level of activity of 30,000 direct labor hours. The planning budget income statement is based on the expectation of selling 40,000 units of CXW. The budgeted sales price is $65 per unit, and total budgeted fixed selling and administrative costs are $500,000. There are no variable selling and administrative costs in this firm The company actually produced and sold 36,000 units this year. The company never has a beginning or ending raw materials inventory, because it uses all raw materials purchased. Also, the company never has a beginning or ending finished goods inventory. Everything produced in the year is sold in that same year. The actual income statement for the year is provided in Exhibit B. The actual income statement for the vear is provided in Exhibit B Exhibit B Zimmerman Inc. Actual Income Statement Sales: 36,000 units produced and sold at $68 $2,448,000 Less Variable Costs: Direct materials (100,000 pounds at $4.25 per pound) Direct labor (32,000 direct labor hours at $18/hr.) Variable manufacturing overhead 425,000 576,000 400,000 1,047,000 Contribution margin Less Fixed Costs: Fixed manufacturing overhead costs Fixed selling and administrative costs 280,000 485,000 282,000 Net operating income 2.Prepare a detailed income statement variance analysis using the contribution approach income statement (ie., variable costing basis) for the year (ie compare the actual income statement with the flexible budget income statement and compare the flexible budget income statement with the planning budget income statement). Show all the revenue, spending, and activity variances appearing in the income statement analysis. A template for answering this question is given below. All variances should be marked with either an "F" for favorable or "U" for unfavorable. (35 points) Zimmerman Variance Case Solution Template for Part 1 Revenue & Spending Variances S$$ Actual Results SS$ ble Activity lanning Budget VariancesBudget Sales Less V.. DM DL V-OH SS$ SS$ SS$ S$$ S$$ SS$ S$$ S$$ S$$ SS$ SS$ $$S CM Less FC SS$ SS$ Manufacturing$$$ Sell & AdminS$S SS$ S$$ S$$ $S$ SS$ NOI SS$ SS$ 3. Prepare a very detailed manufacturing cost variance analysis (e.g., calculate the material price variance and quantity variance; the labor rate variance and efficiency variance; the variable overhead rate variance and efficiency variance; and the fixed manufacturing overhead budget variance and volume variance). All variances should be marked with either an "F" for favorable or variance). All variances should be marked with either an "F for favorable or "U" for unfavorable. Show your calculations. (40 points) Could you reconcile spending variances in Part 2 with manufacturing cost variances in Part 3? For example, how is the amount of spending variance for direct materials in Part 2 explained by the amounts of direct material variances in Part 3? Excluding your quantitative analysis if any, your explanation should not be more than 1/3 page double spaced with a 12 font size. (10 points) Zimmerman Inc. manufactures a single product, CXW. Zimmerman uses budgets and standards in its planning and control functions. Zimmerman makes use of its standards in order to derive their budgeted cost per unit. For example, Exhibit A provides information on the budgeted varia direct material costs for the planning budget income statement, the S12 budgeted material cost per unit of CXW would be used in the calculation ble costs per unit. When determining Exhibit A Budgeted (Standard) Variable Costs Per Unit of CXW $12 15 Raw material: 3 pounds at $4 per pound Direct labor: 0.75 direct labor hours at $20 per hour Variable overhead: 0.75 direct labor hours at $12 per hour $36 Total variable budgeted (standard) cost per CXW The standards for fixed manufacturing overhead costs are: 0.75 direct labor hours at $8 per hour. The standard fixed manufacturing overhead cost per hour is calculated based on a denominator level of activity of 30,000 direct labor hours. The planning budget income statement is based on the expectation of selling 40,000 units of CXW. The budgeted sales price is $65 per unit, and total budgeted fixed selling and administrative costs are $500,000. There are no variable selling and administrative costs in this firm The company actually produced and sold 36,000 units this year. The company never has a beginning or ending raw materials inventory, because it uses all raw materials purchased. Also, the company never has a beginning or ending finished goods inventory. Everything produced in the year is sold in that same year. The actual income statement for the year is provided in Exhibit B. The actual income statement for the vear is provided in Exhibit B Exhibit B Zimmerman Inc. Actual Income Statement Sales: 36,000 units produced and sold at $68 $2,448,000 Less Variable Costs: Direct materials (100,000 pounds at $4.25 per pound) Direct labor (32,000 direct labor hours at $18/hr.) Variable manufacturing overhead 425,000 576,000 400,000 1,047,000 Contribution margin Less Fixed Costs: Fixed manufacturing overhead costs Fixed selling and administrative costs 280,000 485,000 282,000 Net operating income 2.Prepare a detailed income statement variance analysis using the contribution approach income statement (ie., variable costing basis) for the year (ie compare the actual income statement with the flexible budget income statement and compare the flexible budget income statement with the planning budget income statement). Show all the revenue, spending, and activity variances appearing in the income statement analysis. A template for answering this question is given below. All variances should be marked with either an "F" for favorable or "U" for unfavorable. (35 points) Zimmerman Variance Case Solution Template for Part 1 Revenue & Spending Variances S$$ Actual Results SS$ ble Activity lanning Budget VariancesBudget Sales Less V.. DM DL V-OH SS$ SS$ SS$ S$$ S$$ SS$ S$$ S$$ S$$ SS$ SS$ $$S CM Less FC SS$ SS$ Manufacturing$$$ Sell & AdminS$S SS$ S$$ S$$ $S$ SS$ NOI SS$ SS$ 3. Prepare a very detailed manufacturing cost variance analysis (e.g., calculate the material price variance and quantity variance; the labor rate variance and efficiency variance; the variable overhead rate variance and efficiency variance; and the fixed manufacturing overhead budget variance and volume variance). All variances should be marked with either an "F" for favorable or variance). All variances should be marked with either an "F for favorable or "U" for unfavorable. Show your calculations. (40 points) Could you reconcile spending variances in Part 2 with manufacturing cost variances in Part 3? For example, how is the amount of spending variance for direct materials in Part 2 explained by the amounts of direct material variances in Part 3? Excluding your quantitative analysis if any, your explanation should not be more than 1/3 page double spaced with a 12 font size. (10 points)