Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 390 cases off the production line before the end of the month. But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled at how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story. Cases produced and sold Sales revenue Less variable expenses Direct material Direct labor Actual 10,300 $2,080,400 592,650 288,300 Budget 9,910 $1,915,000 575,300 271,500 Variance 390 Favorable $165,400 Favorable 17,350 Unfavorable 16,800 Unfavorable

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom
line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last
390 cases off the production line before the end of the month.
But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was
puzzled at how most of the operating expenses could be higher than the budget since she had worked hard to manage the production
line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story.
Cases produced and sold
Sales revenue
Less variable expenses
Direct material
Direct labor
Variable manufacturing overhead
Variable selling expenses
Variable administrative expenses
Total variable expense
Contribution margin
Less fixed expenses
Fixed manufacturing overhead
Fixed selling expenses
Fixed administrative expenses
Total fixed expense
Operating income
Actual
10,300
$2,080,400
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total standard cost per case
592,650
288,300
226.300
111,800
42,650
1,261,700
818,700
113,000
85,150
135,000
333,150
$485,550
Budget
9,910
$1,915,000
Irvin also found the standard cost card for a case of product.
Standard Price
$11.35 per pound
$11.15 per DLH
$4.40 per MH
$2.40 per MH
575,300
271,500
225,500
108,600
41,300
1,222,200
692,800
115,800
84,200
133,500
Direct materials purchased: 53,800 pounds at a total of $610,630
Direct materials used: 51,400 pounds
Direct labor hours worked: 25,220 at a total cost of $278,593
Machine hours used: 52,000
333,500
$359,300
Standard Quantity
5.00 pounds
2.40 DLH
5 MH
Variance
Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating income for the month, but look at all the
unfavorable variances on the operating costs. Can you help me understand what's going on?" "Let me look into it and I'll get back to
you, Irvin replied.
Irvin gathered the following additional information about the month's performance.
5 MH
390 Favorable
$165,400 Favorable
17,350 Unfavorable
16,800 Unfavorable
800 Unfavorable
3,200 Unfavorable
1,350 Unfavorable
39,500 Unfavorable
125,900 Favorable
2,800 Favorable
950 Unfavorable
1,500 Unfavorable.
(350) Favorable
$126,250 Favorable
Standard Cost
$56.75
26.76
22.00
12.00
$117.51
Transcribed Image Text:Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 390 cases off the production line before the end of the month. But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled at how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story. Cases produced and sold Sales revenue Less variable expenses Direct material Direct labor Variable manufacturing overhead Variable selling expenses Variable administrative expenses Total variable expense Contribution margin Less fixed expenses Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses Total fixed expense Operating income Actual 10,300 $2,080,400 Direct materials Direct labor Variable overhead Fixed overhead Total standard cost per case 592,650 288,300 226.300 111,800 42,650 1,261,700 818,700 113,000 85,150 135,000 333,150 $485,550 Budget 9,910 $1,915,000 Irvin also found the standard cost card for a case of product. Standard Price $11.35 per pound $11.15 per DLH $4.40 per MH $2.40 per MH 575,300 271,500 225,500 108,600 41,300 1,222,200 692,800 115,800 84,200 133,500 Direct materials purchased: 53,800 pounds at a total of $610,630 Direct materials used: 51,400 pounds Direct labor hours worked: 25,220 at a total cost of $278,593 Machine hours used: 52,000 333,500 $359,300 Standard Quantity 5.00 pounds 2.40 DLH 5 MH Variance Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating income for the month, but look at all the unfavorable variances on the operating costs. Can you help me understand what's going on?" "Let me look into it and I'll get back to you, Irvin replied. Irvin gathered the following additional information about the month's performance. 5 MH 390 Favorable $165,400 Favorable 17,350 Unfavorable 16,800 Unfavorable 800 Unfavorable 3,200 Unfavorable 1,350 Unfavorable 39,500 Unfavorable 125,900 Favorable 2,800 Favorable 950 Unfavorable 1,500 Unfavorable. (350) Favorable $126,250 Favorable Standard Cost $56.75 26.76 22.00 12.00 $117.51
(a-g)
Your answer is partially correct.
(a-b) Calculate the direct material price variance and direct material quantity variance for the month. (If variance is zero, select "Not
Applicable" and enter O for the amounts.)
Direct material price variance
Direct material quantity variance
Direct labor rate variance
Direct labor efficiency variance
(c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to O decimal places,
e.g. 1,525. If variance is zero, select "Not Applicable" and enter O for the amounts.)
$
Variable overhead spending variance
$
Variable overhead efficiency variance
Fixed overhead spending variance
eTextbook and Media
$
Save for Later
$
$
$
467,690
(e-f) Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. (If variance is
zero, select "Not Applicable" and enter O for the amounts.)
$
0
2,522
5,580
Not Applicable
0
2,200
Favorable
350
Favorable
(g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter O for the
amounts.)
Unfavorable
Favorable
Unfavorable
Favorable
Attempts: unlimited Submit Answer
Transcribed Image Text:(a-g) Your answer is partially correct. (a-b) Calculate the direct material price variance and direct material quantity variance for the month. (If variance is zero, select "Not Applicable" and enter O for the amounts.) Direct material price variance Direct material quantity variance Direct labor rate variance Direct labor efficiency variance (c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to O decimal places, e.g. 1,525. If variance is zero, select "Not Applicable" and enter O for the amounts.) $ Variable overhead spending variance $ Variable overhead efficiency variance Fixed overhead spending variance eTextbook and Media $ Save for Later $ $ $ 467,690 (e-f) Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. (If variance is zero, select "Not Applicable" and enter O for the amounts.) $ 0 2,522 5,580 Not Applicable 0 2,200 Favorable 350 Favorable (g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter O for the amounts.) Unfavorable Favorable Unfavorable Favorable Attempts: unlimited Submit Answer
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