Tasty Creations is a manufacturer of pumpkin pies. For September 2014, the company's operating budget included the following:
Sales (units-standard quantity) ..................... 500,000
Average selling price per pie ......................... $ 4.50
Direct materials costs per pie ......................... $ 1.75
Total fixed costs for the month ...................... .$350,000
Actual results were as follows:
Sales (units-actual quantity) ........................ 465,000
Average selling price per pie ........................ $ 4.60
Direct materials costs per pie ........................ $ 1.65
Total fixed costs for the month ...................... $355,000
Tasty Creations' CEO observed that September's operating income was much lower than anticipated and has asked you to prepare a report outlining the reasons for the discouraging results.
Required:
1. Calculate the total materials variance for the month of September.
2. Calculate the materials price variance and materials usage variance for September, indicating whether the variances are favourable or unfavourable.
3. Prepare a brief memo for the CEO of Tasty Creations that discusses the reported operating income for September.