Units in pounds 400000 450000 50000f revenue 3200000

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Units (in pounds)……………………………. 400,000 450,000 50,000F Revenue……………………………………… $3,200,000 $3,555,000 $355,000F Direct material………………………………. $580,000 $865,000 $285,000U Direct labor………………………………….. 336,000 348,000 12,000U Variable overhead…………………………… 648,000 750,000 102,000U Total variable costs………………………... $1,564,000 $1,963,000 $399,000U Contribution margin…………………………. $1,636,000 $1,592,000 $44,000U Justine Madison, president of the company, is disappointed with the results. Despite a sizable increase in the number of cookies sold, the product’s expected contribution to the
overall profitability of the firm decreased. Madison has asked Blair to identify the reason why the contribution margin decreased. Blair has gathered the following information to help in her analysis of the decrease. Usage Report for April Cost Item Quantity Actual cost Direct materials: Cookie mix……………………. Milk chocolate………………… Almonds………………………. 4,650,000 oz. 2,660,000 oz. 480,000 oz. $93,000 532,000 240,000 Direct labor: Mixing………………………… Baking………………………… 450,000 min. 800,000 min. 108,000 240,000 Variable overhead………………. …………………….. 750,000 Total variable costs…………… ……………………… $1,963,000 1. What is the Direct-material quantity variance? 2. What is the Direct-labor rate variance? 3. What is the direct-labor efficiency variance? 4. What is the variable-overhead efficiency variable? 5. What is the sales-price variance? 6. Explain the problems that might arise in using direct-labor hours as the basis for applying overhead. 7. How might activity-based costing (ABC) solve the problems described in 6?

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