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At the monthly management meeting Leslie Smith president of Mama FranAcs Fantastic Foods, was reviewing the April budget report with some satisfaction Ac Our actual results are

At the monthly management meeting, Leslie Smith, president of Mama FranAc€?cs Fantastic Foods, was reviewing the April budget report with some satisfaction. Ac€A?Our actual results are never exactly what we budget, but I guess if weAc€?cre off by only 2% to 3%, weAc€?cve done a good job forecasting.Ac€?? The report she referred to follows.

April Budget Report

               Actual           Budget           Variance

Sales (in pounds)       450,000       400,000          50,000 F

Revenues           $3,555,000       $3,200,000       $355,000 F

Less Variable Expenses  

   Direct Materials       865,000       580,000       285,000 U

   Direct Labor           348,000       336,000       12,000 U

   Variable Overhead       750,000       648,000       102,000 U

Total Variable Expenses          1,963,000          1,564,000       399,000 U

Contribution Margin       $1,592,000       $1,636,000       ($ 44,000 U)

Nathan Porter, the companyAc€?cs purchasing manager, chimed in. Ac€A?It surprises me that we did as well as we did. I know that chocolate prices went up dramatically last month, so I expected a much larger variance. And we had that little mix-up when we ordered a batch of whole almonds instead of sliced almonds.Ac€??

But controller Ashley Corley looked concerned. Ac€A?Hang on a minute, guys. I donAc€?ct think this budget report gives us the true picture. Let me work on it some more and get back to you.Ac€??

AshleyAc€?cs first step was to track down the following standard cost card for the cookies.

Chocolate Nut Supreme Cookies

   Item              Quantity    Standard Unit Cost   Total Cost

Direct Materials

Cookie Mix               10 ounces      $0.02 per ounce   $0.20

Milk chocolate                  5 ounces      $0.15 per ounce      0.75

Almonds                  1 ounce      $0.50 per ounce      0.50

Total direct materials                                   $1.45

Direct Labor

Mixing                   1 minute      $14.40 per hour      0.24

Baking                   2 minutes      $18.00 per hour      0.60

   Total direct labor                                      0.84

Variable Overhead           3 minutes      $32.40 per hour          1.62

   Total Standard cost per pound                           $3.91

Ashley also tracked down this additional information about the monthAc€?cs operations.

         Item        Actual Quantity Used           Actual Cost

Direct Materials

Cookie Mix               4,650,000 ounces           $ 93,000

Milk Chocolate               2,660,000 ounces           532,000

Almonds               480,000 ounces           240,000

Direct Labor  

Mixing                   540,000 minutes           108,000

Baking                   800,000 minutes           240,000

Variable overhead                               750,000

Total Actual variable costs                           $1,963,000


Prepare a more informative performance report for the month of April.

Are the results better or worse than Leslie had first thought? Explain your answer

Calculate the direct materials variances for each input, assuming that all materials purchased were used during the month.

Calculate the direct labor variances for April.

Calculate the variable overhead variances for April.

What do you think may have caused the April variances?

May 14 2020 View more View Less

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