Chapters%2021%20-%2023%20Textbook%20Hand-in%20Solutions[1]

Accounting: Tools for Business Decision Making

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PROBLEM 21-4B (a) HENNING MANUFACTURING INC. Patio Furniture Division Responsibility Report For the Year Ended December 31, 2007 Difference Budget Actual Favorable F Unfavorable U Sales Variable costs Cost of goods sold Selling and administrative Total Contribution margin Controllable fixed costs Cost of goods sold Selling and administrative Total Controllable margin $2,500,000 1,300,000 220,000 1,520,000 980,000 200,000 50,000 250,000 $ 730,000 $2,570,000 1,267,000 227,000 1,494,000 1,076,000 205,000 52,000 257,000 $ 819,000 $70,000 F 33,000 F 7,000 U 26,000 F 96,000 F 5,000 U 2,000 U 7,000 U $89,000 F (b) The manager effectively controlled revenues and costs. Contribution margin was $96,000 favorable and controllable margin was $89,000 favorable. Contribution margin was favorable primarily because sales were $70,000 over budget and variable cost of goods sold was $33,000 under budget. Apparently, the manager was able to control variable cost of goods sold when sales exceeded budget expectations. The manager was ineffective in controlling fixed costs. However, the unfavorable difference of $7,000 was only 7% of the favorable difference in contribution margin.
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(c) Two costs are excluded from the report: (1) noncontrollable fixed costs and (2) indirect fixed costs. The reason is that neither cost is controllable by the Patio Furniture Division Manager. PROBLEM 22-1B Total materials variance: (AQXAP) (5,100 X $7.30) $37,230 (SQXSP) (4,800 X $7.00) $33,600 = $3,630U Materials price variance: Know for exam (AQXAP) (5,100 X $7.30) $37,230 (AQXSP) (5,100 X $7.00) $35,700 = $1,530U Materials quantity variance: Know for exam ( AQXSP) (5,100 X $7.00) $35,700 (SQXSP) (4,800 X $7.00) $33,600 = $2,100U Total labor variance: ( AQXAP) (7,000 X $12.50) $87,500 (SQXSP) (7,200* X $12.00) $86,400
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