Author Question: Paul Benny picked up the monthly report that Eve Lynch left on his desk. He was pleased to see the ... (Read 66 times)

Ale · **on:** Feb 5, 2023

Paul Benny picked up the monthly report that Eve Lynch left on his desk. He was pleased to see the favorable variance for operating income. He had pushed hard to exceed budgeted monthly production by 325 units. Paul was puzzled by some of line items in the report. He wonders whether it's an error that most of the operating expenses are higher than the budget after all his hard work to manage the production line to improve efficiency and reduce costs. The report Paul reviewed is shown below:

Actual

Budget

Variance

Units produced and sold

13,325

13,000

325 F

Sales revenue	$2,531,750	$2,431,000	$100,750 F
Direct material	729,300	715,000	14,300 U
Direct labor	347,945	338,000	9,945 U
Variable manufacturing overhead	370,516	364,000	6,516 U
Variable selling expenses	121,069	117,000	4,069 U
Variable administrative expenses	54,262	52,000	2,262 U
Contribution margin	$ 908,658	$ 845,000	$ 63,658 F
Fixed manufacturing overhead	144,300	143,000	1,300 U
Fixed selling expenses	90,350	91,000	650 F
Fixed administrative expenses	168,740	169,000	260 F
Operating income	$ 505,268	$ 442,000	$ 63,268 F

Paul called Eve into his office to discuss all the unfavorable variances in the operating costs. Paul is very confused about how the budgeted operating income for the month is favorable, and yet there are so many unfavorable variances on the operating costs. Eve has promised Paul to investigate and report back any findings. Eve has also gathered the following additional information about the month's performance, and the standard cost card for a unit of product.

•	Direct materials purchased: 132,600 pounds at a total of $729,300

•	Direct materials used: 132,600 pounds

•	Direct labor hours worked: 34,450 at a total cost of $347,945

•	Machine hours used: 53,235

The standard cost card for a unit of product.

Standard Price

Standard Quantity

Standard Cost

Direct materials

$5.50 per pound

10 pounds

$ 55.00

Direct labor

$10.00 per DLH

2.6 DLH

26.00

Variable overhead

$7.00 per MH

4 MH

28.00

Fixed overhead

$3.58 per MH

4 MH

14.32

Total standard cost per unit

$123.32

Required:

a.	Calculate the direct material price variance for the month.

b.	Calculate the direct material quantity variance for the month.

c.	Calculate the direct labor rate variance for the month.

d.	Calculate the direct labor efficiency variance for the month.

e.	Calculate the variable overhead spending variance for the month.

f.	Calculate the variable overhead efficiency variance for the month.

g.	Calculate the fixed overhead spending variance for the month.

h.	Prepare a performance report that will assist Paul in evaluating his efforts to control

production costs.

i.	Based on your review of the performance report you prepared, do you think Paul did

a good job of controlling production expenses during the month? Why or why not?

kyledifference · **Reply #1 on:** Feb 5, 2023

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 58% of students answer this correctly