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. Actual Budget Variance Cases produced and sold 10,300 9,910 390Favorable Sales revenue $ 2,081,100 $ 1,950,000 $ 131,100Favorable Less variable expenses Direct material 593,000 576,000 17,000Unfavorable Direct labor 289,000 275,000 14,000Unfavorable Variable manufacturing overhead 218,100 217,400 700Unfavorable Variable selling expenses 112,500 110,000 2,500Unfavorable Variable administrative expenses 43,000 42,000 1,000Unfavorable Total variable expense 1,255,600 1,220,400 35,200Unfavorable Contribution margin 825,500 729,600 95,900Favorable Less fixed expenses Fixed manufacturing overhead 120,000 123,500 3,500Favorable Fixed selling expenses 85,500 84,900 600Unfavorable Fixed administrative expenses 142,000 140,500 1,500Unfavorable Total fixed expense 347,500 348,900 ( 1,400)Favorable Operating income $ 478,000 $ 380,700 $ 97,300Favorable 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.● Direct materials purchased: 54,500 pounds at a total of $ 637,650 ● Direct materials used: 51,400 pounds ● Direct labor hours worked: 28,310 at a total cost of $ 322,985 ● Machine hours used: 52,000 Irvin also found the standard cost card for a case of product. Standard Price Standard Quantity Standard Cost Direct materials $ 11.70 per pound 5.00 pounds $ 58.50 Direct labor $ 11.50 per DLH 2.70 DLH 31.05 Variable overhead $ 4.25 per MH 5 MH 21.25 Fixed overhead $ 2.70 per MH 5 MH 13.50 Total standard cost per case $ 124.30 Fixed administrative expenses142,000140,5001,500 UnfavorableTotal fixed expense347,500348,900( 1,400) FavorableOperating income$ 478,000$ 380,700$ 97,300 FavorableLexi 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 theunfavorable variances on the operating costs. Can you help me understand what's going on?" “Let me look into it and l'll get back toyou," Irvin replied.Irvin gathered the following additional information about the month's performance.Direct materials purchased: 54,500 pounds at a total of $ 637,650Direct materials used: 51,400 poundsDirect labor hours worked: 28,310 at a total cost of $ 322,985Machineurs used: 52,000Irvin also found the standard cost card for a case of product.StandardStandard PriceStandard QuantityCostDirect materials$ 11.70 per pound5.00 pounds$ 58.50Direct labor$ 11.50 per DLH2.70 DLH31.05Variable overhead$ 4.25 per MH5 MH21.25Fixed overhead$ 2.70 per MH5 MH13.50Total standard cost per case$ 124.30 (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 0 for the amounts.)Not ApplicableDirect material price varianceFavorableDirect material quantity variance(c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to 0 decimalplaces, e.g. 1,525. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)FavorableDirect labor rate varianceUnfavorableDirect labor efficiency variance(e-f) Calculate the variable overhead spending variance and variable overhead efficiency variance for the month. (If variance iszero, select "Not Applicable" and enter 0 for the amounts.)$FavorableVariable overhead spending varianceUnfavorableVariable overhead efficiency variance(g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter 0 forthe amounts.)$Fixed overhead spending varianceFavorable%24%24%24%24%24%24

Hi student Since there are multiple subparts, we will answer only first three subparts.

Answered: (a-b) Calculate the direct material…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 21E: Madison Company uses the following rule to determine whether direct labor efficiency variances ought...

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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.

	Actual	Budget		Variance
Cases produced and sold	10,300		9,910		390	Favorable
Sales revenue	$ 2,081,100		$ 1,950,000		$ 131,100	Favorable
Less variable expenses
Direct material	593,000		576,000		17,000	Unfavorable
Direct labor	289,000		275,000		14,000	Unfavorable
Variable manufacturing overhead	218,100		217,400		700	Unfavorable
Variable selling expenses	112,500		110,000		2,500	Unfavorable
Variable administrative expenses	43,000		42,000		1,000	Unfavorable
Total variable expense	1,255,600		1,220,400		35,200	Unfavorable
Contribution margin	825,500		729,600		95,900	Favorable
Less fixed expenses
Fixed manufacturing overhead	120,000		123,500		3,500	Favorable
Fixed selling expenses	85,500		84,900		600	Unfavorable
Fixed administrative expenses	142,000		140,500		1,500	Unfavorable
Total fixed expense	347,500		348,900		( 1,400)	Favorable
Operating income	$ 478,000		$ 380,700		$ 97,300	Favorable

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.

●		Direct materials purchased: 54,500 pounds at a total of $ 637,650
●		Direct materials used: 51,400 pounds
●		Direct labor hours worked: 28,310 at a total cost of $ 322,985
●		Machine hours used: 52,000

Irvin also found the standard cost card for a case of product.

	Standard Price	Standard Quantity	Standard Cost
Direct materials	$ 11.70 per pound	5.00 pounds	$ 58.50
Direct labor	$ 11.50 per DLH	2.70 DLH	31.05
Variable overhead	$ 4.25 per MH	5 MH	21.25
Fixed overhead	$ 2.70 per MH	5 MH	13.50
Total standard cost per case			$ 124.30

Fixed administrative expenses
142,000
140,500
1,500 Unfavorable
Total fixed expense
347,500
348,900
( 1,400) Favorable
Operating income
$ 478,000
$ 380,700
$ 97,300 Favorable
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 l'll get back to
you," Irvin replied.
Irvin gathered the following additional information about the month's performance.
Direct materials purchased: 54,500 pounds at a total of $ 637,650
Direct materials used: 51,400 pounds
Direct labor hours worked: 28,310 at a total cost of $ 322,985
Machine
urs used: 52,000
Irvin also found the standard cost card for a case of product.
Standard
Standard Price
Standard Quantity
Cost
Direct materials
$ 11.70 per pound
5.00 pounds
$ 58.50
Direct labor
$ 11.50 per DLH
2.70 DLH
31.05
Variable overhead
$ 4.25 per MH
5 MH
21.25
Fixed overhead
$ 2.70 per MH
5 MH
13.50
Total standard cost per case
$ 124.30

(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 0 for the amounts.)
Not Applicable
Direct material price variance
Favorable
Direct material quantity variance
(c-d) Calculate the direct labor rate variance and direct labor efficiency variance for the month. (Round answers to 0 decimal
places, e.g. 1,525. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Favorable
Direct labor rate variance
Unfavorable
Direct labor efficiency variance
(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 0 for the amounts.)
$
Favorable
Variable overhead spending variance
Unfavorable
Variable overhead efficiency variance
(g) Calculate the fixed overhead spending variance for the month. (If variance is zero, select "Not Applicable" and enter 0 for
the amounts.)
$
Fixed overhead spending variance
Favorable
%24
%24
%24
%24
%24
%24

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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