(Appendix) Interpret a standard cost income statement (Learning Objective 6)

The managers of Viewx, a contract manufacturer of DVD drives, are seeking expla¬ nations for the variances in the following report. Explain the meaning of each of Viewx’s materials, labor, and overhead variances.

Sales revenue VIEWX CO. Standard Cost Income Statement Year Ended December 31, 2007 Cost of goods sold at standard cost Manufacturing cost variances: $1,200,000 700,000 Direct materials price variance $ 8,000 F Direct materials efficiency variance 32,000 U Direct labor price variance 24,000 F Direct labor efficiency variance 10,000 U Manufacturing overhead flexible budget variance 28,000 U Production volume variance 8,000 F Total manufacturing variances 30,000 Cost of goods sold at actual cost 730,000 Gross profit Marketing and administrative expenses Operating income 470,000 418,000 $ 52,000