Please provide the solutions. I NEED TO KNOW IF IT IS FAVORABLE OR UNFAVORABLE.

Question

Please provide the solutions. I NEED TO KNOW IF IT IS FAVORABLE OR UNFAVORABLE.

Problem 6-30 Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her cyes went straight to the bottorm line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 340 cases off the production line before the end of the month But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled at how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story. Actual Budget 9,910 $1,853,200 Variance Cases produced and sold Sales revenue Less variable expenses 340 Favorable 10,250 $1,930,000 $76,800 Favorable Direct material Direct labor Variable manufacturing overhead Variable selling expenses variable administrative expenses 555,951 265,241 282,447 92,292 41,364 1,237,295 592,705 545,050 257,660 277,480 89,190 39,640 1,209.020 644,180 10,901 Unfavorable 7,581 Unfavorable 4,967 Unfavorable 3,102 Unfavorable 1,724 Unfavorable 28,275 Unfavorable Total varlable expense Contribution margin Less fixed expenses 48,523 Favorable Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses 110,001 68,875 128,632 307,508 385,197 109,010 69.370 128,830 307,210 991 Unfavorable (495 Favorable) (198 Favorable) Total fixed expense 298 Unfavorable Operating income $48,227 Favorable Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating Income for the month, but look at all the unfavorable varlances on the operating costs. Can you help me understand what's going on? Let me look into it and I'll get back to you, Irvin replied. Irvin gathered the following additional information about the month's performance. Direct materials purchased: 101,082 pounds at a total of $555,951 . Direct materials used: 101,082 pounds

Explanation / Answer

a. Direct material price variance = (SP - AP) x AQ purchased

= [$5.50 - ($555951/ 101082)] x 101082

= $0 Not Applicable

b. Direct material quantity variance = (SQ - AQ) x SP

= [(10 x 10250) - 101082] x $5.50

= 1418 x $5.50

= $7799 Favorable

c. Direct labor rate variance = (SR - AR) x AH

= [$10 - ($265241/ 26262)] x 26262

= $2621 Unfavorable

d. Direct labor efficiency variance = (SH - AH) x SR

= [(10250 x 2.58) - 26262] x $10

= $1830 Favorable

e. Variable overhead spending variance = (SR - AR) x AH

= [$7 - ($282447/ 40581)] x 40581

= $1620 Favorable

f. Variable overhead efficiency variance = (SH - AH) x SR

= [(4 x 10250) - 40581] x $7

= $2933 Favorable

g. Fixed overhead spending variance = Budgeted - Actual

= $307210 - $307508

= $298 Unfavorable

Performance report

Yes.

Price/Rate/Spending Variance Quantity/Efiiciency Variance Direct materials $0 NA $7799 F Direct labor $2621 U $1830 F Variable overhead $1620 F $2933 F Fixed overhead $298 U $0 NA Total $1299 U $12562 F

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