Candy Cane Company At the beginning of the holiday season, Candy Cane Company estimated that sales would be 50,000 boxes of chocolate. Actual sales totaled 70,000 boxes of chocolate. The product manager expected a large bonus based upon the additional income that a 40% increase in sales would provide. Imagine her surprise upon seeing the following report: Master Budget Actual Results 50,000 70,000 $250,000 $300,000 Number of boxes Sales revenues Less variable costs: Materials Labor Overhead S,G,&A 60,000 50,000 25,000 10,000 Total variable costs 145,000 Contribution margin 105,000 Less fixed costs: Manufacturing 15,000 30,000 45.000 $60,000 82,000 67,000 36,000 15,000 200,000 100,000 16,000 28,000 44,000 $56,000 S,G,&A Total fixed costs Net income The company's owner is very upset charging that the product manager did such a poor job of controlling costs. Required: 1.) Prepare a performance report that can be used to evaluate the owner's charge that the product manager did a poor job of controlling costs. Be sure to label variances as favorable or unfavorable. 2.) Is the owner justified in charging the manager with poor cost control? Why or why not?

Candy Cane Company At the beginning of the holiday season, Candy Cane Company estimated that sales would be 50,000 boxes of chocolate. Actual sales totaled 70,000 boxes of chocolate. The product manager expected a large bonus based upon the additional income that a 40% increase in sales would provide. Imagine her surprise upon seeing the following report: Master Budget Actual Results 50,000 70,000 $250,000 $300,000 Number of boxes Sales revenues Less variable costs: Materials Labor Overhead S,G,&A 60,000 50,000 25,000 10,000 Total variable costs 145,000 Contribution margin 105,000 Less fixed costs: Manufacturing 15,000 30,000 45.000 $60,000 82,000 67,000 36,000 15,000 200,000 100,000 16,000 28,000 44,000 $56,000 S,G,&A Total fixed costs Net income The company's owner is very upset charging that the product manager did such a poor job of controlling costs. Required: 1.) Prepare a performance report that can be used to evaluate the owner's charge that the product manager did a poor job of controlling costs. Be sure to label variances as favorable or unfavorable. 2.) Is the owner justified in charging the manager with poor cost control? Why or why not?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 40P

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