The static budget column in the contribution report is replaced with a flexible budget column. b) The variances in the contribution report are recomputed as the difference between the flexible budget and the actual columns. What is the total contribution margin in the flexible budget column? What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for requirement 1? Explain this total contribution margin variance by computing the following variances. (assume that all materials are used in the month of purchase). d. Direct-labor efficiency variance
Aunt Molly's Old Fashioned Cookies bakes cookies for retail stores. The company's best-selling cookie is the chocolate nut supreme, which is marketed as a gourmet cookie and regularly sells for $8.00 per pound. The
| Cost Item | Quantity | Standard Unit Cost | Total Cost |
|
Direct material: |
|||
| Cookie mix | 10 oz. | $0.02 per oz. | $0.20 |
| Milk Chocolate | 5 oz. | $0.15 per oz. | $0.75 |
| Almonds | 1 oz. | $0.50 per oz. | $0.50 |
| Total | $1.45 | ||
| Direct Labor | |||
| Mixing | 1 min | $14.40 per hr. | $0.24 |
| Baking | 2 min | $18.00 per hr. | $0.60 |
| Total | $0.84 | ||
| Cost Item | Quantity | Standard Unit Cost | Total Cost |
| Variable |
3 min | $32.40 per direct-labor hr. | $1.62 |
| Total Standard cost per pound | $3.91 |
Aunt Molly's
Contribution report for April:
| Static |
Actual | Variance | Favorable or unfavorable | |
| Units (in pounds) | 400,000 | 450,000 | 50,000 | Favorable |
| Revenue | $3,200,000 | $3,555,000 | $355,000 | Favorable |
| Direct material | $580,000 | $865,000 | $285,000 | Unfavorable |
| Direct labor | $336,000 | $348,000 | $12,000 | Unfavorable |
| Variable Overhead | $648,000 | $750,000 | $102,000 | Unfavorable |
| Total variable costs | $1,564,000 | $1,963,000 | $399,000 | Unfavorable |
| Contribution margin | $1,636,000 | $1,592,000 | $44,000 | Unfavorable |
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 the analysis of the decrease.
Usage report for April:
| Cost Item | Quantity | Actual cost |
| Direct materials | ||
| Cookie mix | 4,650,000 oz. | $93,000 |
| Milk Chocolate | 2,660,000 oz. | $532,000 |
| Almonds | 480,000 oz. | $240,000 |
| Direct labor | ||
| Mixing | 450,000 min | $108,000 |
| Baking | 800,000 min | $240,000 |
| Variable overhead | $750,000 | |
| Total variable cost | $1,963,000 |
What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for requirement 1? Explain this total contribution margin variance by computing the following variances. (assume that all materials are used in the month of purchase).
Prepare a new contribution report for April, in which:
a) The static budget column in the contribution report is replaced with a flexible budget column.
b) The variances in the contribution report are recomputed as the difference between the flexible budget and the actual columns. What is the total contribution margin in the flexible budget column?
What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for requirement 1? Explain this total contribution margin variance by computing the following variances. (assume that all materials are used in the month of purchase).
d. Direct-labor efficiency variance
e. Variable overhead spending variance
f. Variable-overhead efficiency variance
g. sales-price variance
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