K&J Web Designs creates Web sites for businesses. K&J has a basic Web site creat
ID: 2457151 • Letter: K
Question
K&J Web Designs creates Web sites for businesses. K&J has a basic Web site creation package that it offers for a flat fee of $720. This package includes everything that a business would need to have a simple but functional Web site built. K&J estimates that each of these Web sites should take, on average, 8.4 hours of Web designer time. K&J pays its Web design employees an average of $37 per hour.
Last month, K&J sold and built 140 Web sites for $720 each. Web design employees worked a total of 810 hours at a total payroll cost of $38,070.
K&J Web Designs creates Web sites for businesses. K&J has a basic Web site creation package that it offers for a flat fee of $720. This package includes everything that a business would need to have a simple but functional Web site built. K&J estimates that each of these Web sites should take, on average, 8.4 hours of Web designer time. K&J pays its Web design employees an average of $37 per hour.
Last month, K&J sold and built 140 Web sites for $720 each. Web design employees worked a total of 810 hours at a total payroll cost of $38,070.
Explanation / Answer
Labor rate Variance = ( Standard Rate - Actual Rate ) * Actual hours worked
= ( 37-38070/810)*810
= ( 37-47)*810 i.e 8100 unfavourable
Labour efficiency variance = ( Stanadard hours - Actual hours ) * Standard rate
= (( 140*8.4)-810)*37
= 13542 Favourable
Standard Contribution margin = Sales - Variable cost
= ( 140*720) - ( 140*8.4*37)
= 100800-43512 i.e 57288
Standard contribution margin per website = 57288/140 i.e 409.20
Actual Contribution margin = ( 140*720) - 38070
= 100800-38070 i.e 62730
Actual Contribution margin per unit = 62730/140 i.e 448.07
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