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.

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Sales in units Sales Revenue American Fashion Inc. Performance Report, March 2018 Variable manufacturing Costs Fixed manufacturing costs Cost of goods sold Gross margin Operating Costs: Variable marketing costs Fixed marketing costs Fixed administrative costs Total Operating Costs Operating Income Actual Budget Difference 17,000 15,900 1,100 U S S $ 588,300 595,000 6,700 U 198,240 204,000 5760 F 136,200 136,000 200 U 334,440 340,000 5,560 F 253,860 255,000 1,140 U 95,400 85,000 65,000 60,000 50,100 50,000 210,500 195,000 15,500 U 43,360 60,000 16,640 U 10,400 U 5,000 U 100 U Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Standard Quantity or Hours Standard Price or Rate Standard Cost $2.00 per pound $6.00 $6.00 per hour 4.80 $3.00 per hour 1.20 $20.00 per hour 8.00 $20.00 3.0 pounds 0.8 hours 0.4 machine-hour 0.4 machine - hour Sales in units Sales Revenue American Fashion Inc. Performance Report, March 2018 Variable manufacturing Costs Fixed manufacturing costs Cost of goods sold Gross margin Operating Costs: Variable marketing costs Fixed marketing costs Fixed administrative costs Total Operating Costs Operating Income Actual Budget Difference 17,000 15,900 1,100 U S S $ 588,300 595,000 6,700 U 198,240 204,000 5760 F 136,200 136,000 200 U 334,440 340,000 5,560 F 253,860 255,000 1,140 U 95,400 85,000 65,000 60,000 50,100 50,000 210,500 195,000 15,500 U 43,360 60,000 16,640 U 10,400 U 5,000 U 100 U Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Standard Quantity or Hours Standard Price or Rate Standard Cost $2.00 per pound $6.00 $6.00 per hour 4.80 $3.00 per hour 1.20 $20.00 per hour 8.00 $20.00 3.0 pounds 0.8 hours 0.4 machine-hour 0.4 machine - hour