American Fashion Inc., financial accountant prepared the following performance report for March 2018. During this month the
Question:
American Fashion Inc., financial accountant prepared the following performance report for March 2018. During this month the company produced and sold 15,900 items. There is no beginning or ending inventories.
The following additional information is available.
a. The company purchased and used 44,000 pounds of materials at a cost of $2.30 per pound.
b. Worked 12,500 direct labor hours at a rate of $6.30 per hour.
c. Incurred variable manufacturing overhead costs of $18,290 for the month. A total of 5,900 machine-hours were recorded.
Required:
1. Prepare a new performance report (Contribution margin format) that uses a flexible budget and a static budget.
2. Compute the following variances:
(a) Direct materials price and efficiency variances
(b) Direct labor rate and efficiency variances
(c) Variable manufacturing overhead spending and efficiency variances.
(d) Fixed manufacturing overhead spending and production volume variances.