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
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
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 25E: Lowell Manufacturing Inc. has a normal selling price of 20 per unit and has been selling 125,000...
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Step 1: Define variance analysis
VIEWStep 2: Calculation of direct material price and quantity variance
VIEWStep 3: Calculation of labor rate and efficiency variance
VIEWStep 4: Calculation of variable overhead spending and efficiency variance
VIEWStep 5: Calculation of fixed overhead spending variance
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