Comprehensive variance analysis review. Ellis Animal Health, Inc., produces a generic medication used to treat cats with feline diabetes. The liquid medication is sold in 100 ml vials. Ellis employs a team of sales representatives who are paid varying amounts of commission.
Given the narrow margins in the generic veterinary drugs industry, Ellis relies on tight
Average selling price per vial | $ 8.30 |
Total direct materials cost per vial | $ 3.60 |
Direct |
$ 15.00 |
Average labor productivity rate (vials per hour) | 100 |
Sales commission cost per vial | $ 0.72 |
Fixed administrative and manufacturing |
$990,000 |
Ellis budgeted sales of 700,000 vials for April. At the end of the month, the controller revealed that actual results for April had deviated from the budget in several ways:
- Unit sales and production were 90% of plan.
- Actual average selling price decreased to $8.20.
- Productivity dropped to 90 vials per hour.
- Actual direct manufacturing labor cost was $15.20 per hour.
- Actual total direct material cost per unit increased to $3.90.
- Actual sales commissions were $0.70 per vial.
- Fixed overhead costs were $110,000 above budget.
Calculate the following amounts for Ellis for April 2017:
- 1. Static-budget and actual operating income
Required
- 2. Static-
budget variance for operating income - 3. Flexible-budget operating income
- 4. Flexible-budget variance for operating income
- 5. Sales-volume variance for operating income
- 6. Price and efficiency variances for direct manufacturing labor
- 7. Flexible-budget variance for direct manufacturing labor
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Chapter 7 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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