Aunt Mollys Old Fashioned Cookies bakes cookies for retail stores. The companys best-selling cookie is chocolate nut
Question:
Aunt Molly’s Old Fashioned Cookies bakes cookies for retail stores. The company’s best-selling cookie is chocolate nut supreme, which is marketed as a gourmet cookie and regularly sells for $9.00 per pound. The standard cost per pound of chocolate nut supreme, based on Aunt Molly’s normal monthly production of 410,000 pounds, is as follows:
Cost Item | Quantity | Standard Unit Cost | Total Cost | |||||||||||||
Direct materials: | ||||||||||||||||
Cookie mix | 10 | oz. | $ | 0.05 | per oz. | $ | 0.50 | |||||||||
Milk chocolate | 5 | oz. | 0.18 | per oz. | 0.90 | |||||||||||
Almonds | 1 | oz. | 0.53 | per oz. | 0.53 | |||||||||||
$ | 1.93 | |||||||||||||||
Direct labor:* | ||||||||||||||||
Mixing | 1 | min. | 14.40 | per hr. | $ | 0.24 | ||||||||||
Baking | 2 | min. | 24.00 | per hr. | 0.80 | |||||||||||
$ | 1.04 | |||||||||||||||
Variable overhead† | 3 | min. | 38.40 | per direct-labor hr. | $ | 1.92 | ||||||||||
Total standard cost per pound | $ | 4.89 | ||||||||||||||
*Direct-labor rates include employee benefits.
†Applied on the basis of direct-labor hours.
Aunt Molly’s management accountant, Karen Blair, prepares monthly budget reports based on these standard costs. April’s contribution report, which compares budgeted and actual performance, is shown in the following schedule.
Contribution Report for April | ||||||||||||
Static Budget | Actual | Variance | ||||||||||
Units (in pounds) | 410,000 | 435,000 | 25,000 | F | ||||||||
Revenue | $ | 3,690,000 | $ | 3,871,500 | $ | 181,500 | F | |||||
Direct material | $ | 791,300 | $ | 1,055,450 | $ | 264,150 | U | |||||
Direct labor | 426,400 | 413,920 | 12,480 | F | ||||||||
Variable overhead | 787,200 | 816,775 | 29,575 | U | ||||||||
Total variable costs | $ | 2,004,900 | $ | 2,286,145 | $ | 281,245 | U | |||||
Contribution margin | $ | 1,685,100 | $ | 1,585,355 | $ | 99,745 | U | |||||
Justine Madison, president of the company, is disappointed with the results. Despite a sizable increase in the number of cookies sold, the product’s expected contribution to the overall profitability of the firm decreased. Madison has asked Blair to identify the reason why the contribution margin decreased. Blair has gathered the following information to help in her analysis of the decrease.
Usage Report for April | |||||||
Cost Item | Quantity | Actual Cost | |||||
Direct materials: | |||||||
Cookie mix | 4,425,000 | oz. | $ | 221,250 | |||
Milk chocolate | 2,590,000 | oz. | 595,700 | ||||
Almonds | 450,000 | oz. | 238,500 | ||||
Direct labor: | |||||||
Mixing | 435,000 | min. | 104,400 | ||||
Baking | 773,800 | min. | 309,520 | ||||
Variable overhead | 816,775 | ||||||
Total variable costs | $ | 2,286,145 | |||||
Case 11-55 Part 1
Required:
Prepare a new contribution report for April, in which:
- The static budget column in the contribution report is replaced with a flexible budget column.
- The variances in the contribution report are recomputed as the difference between the flexible budget and actual columns.
Accounting for Governmental and Nonprofit Entities
ISBN: ?978-0073379609
15th Edition
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus