1.
Prepare a new contribution report for the month of April based on a flexible budget.
2.
State the total contribution margin in the flexible budget column of the new report prepared under requirement (1).
3.
Describe the meaning of the total contribution margin in the flexible budget column of the new report prepared for the month of April.
4.
Ascertain the total variance between the flexible budget contribution margin and the actual contribution margin of the new report prepared from requirement (1) and calculate the following variances in order to explain this total contribution margin variance.
- a. Direct-material price variance.
- b. Direct-material quantity variance.
- c. Direct-labor rate variance.
- d. Direct-labor efficiency variance.
- e. Variable-overhead spending variance.
- f. Variable-overhead efficiency variance.
- g. Sales-price variance.
5. a
Describe the problems that the company might face when using direct-labor hours as the basis for applying Overhead.
5. b
Describe the manner in which the activity-based costing (ABC) would solve the problems described in requirement (5a).
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Managerial Accounting: Creating Value in a Dynamic Business Environment
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