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List the variance between actual and flexible budget

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Reference no: EM132381152

Question

Smith's Cookies best-selling cookie is chocolate marshmallow supreme. It is regularly sells for $9.00 per pound. The standard cost per pound based on Smith's normal monthly production of 270,000 pounds is listed below:

Cost Item Quantity Standard Unit Cost Total Cost

Direct materials:

Cookie Mix 10 oz. $0.09 per oz. 0.90

Dark Chocolate 5 oz. $ 0.22 per oz. 1.10

Marshmallows 1 oz. $ 0.57 per oz. 0.57

Total $2.57

Direct labor:

Mixing 1 min. $14.40 per hr. 0.24

Baking 2 min. $24.00 per hr. 0.80

Total $ 1.04

Variable overhead 3 min. $38.40 per DL hr. $1.92

Total standard cost per pound $5.53

Smith's controller, Shelly Yutz prepares monthly budget reports based on these standard costs. Shelly's contribution report, which compares budgeted and actual performance, is shown in the following schedule

Contribution Report for March

Static Budget Actual Variance

Units (in pounds) 270,000 295,000 25,000 Favorable

Revenue 2,430,000 2,625,500 195,500 Favorable

Direct material 693,900 921,450 227,550 Unfavorable

Direct labor 280,800 280,640 160 Favorable

Variable overhead 518,400 491,668 26,732 Unfavorable

Total variable costs 1,493,100 1,693,758 200,658 Unfavorable

Contribution margin 936,900 931,742 5,158 Unfavorable

Despite a sizable increase in the number of cookies sold, the product's expected contribution to the overall profitability of the firm decreased. Shelly has decided to to identify the reason why the contribution margin decreased and he has gathered the following information to help in her analysis of the decrease

Usage Report for March

Cost Item Quantity Actual Cost

Direct Materials:

Cookie mix (oz) 3,025,000 272,250

Dark chocolate (oz) 1,750,000 472,500

Marshmallows (oz) 310,000 176,700

Direct labor:

Mixing (min) 295,000 70,800

Baking (min) 524,600 209,840

Variable overhead 491,668

Total variable costs 1,693,758

Use a flexible budget for a new contribution report for March. List the variance between actual and flexible budget and if it is unfavorable or favorable.

Reference no: EM132381152

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