Case $11-55$ Comprehensive Variance Analysis Used to Explain Operational Results; Review of Chapters $10$ and $11$; Activity$-$Based Costing; Sales Variances $($Appendix B$)($LO $11-4,11-5,11-7,11-9)$

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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 $$9\mathrm{.}00$ per pound. The standard cost per pound of chocolate nut supreme, based on Aunt Molly$$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$.$ $ $0\mathrm{.}05$ per oz$.$ $ $0\mathrm{.}50$

Milk chocolate $5$ oz$.0\mathrm{.}18$ per oz$.0\mathrm{.}90$

Almonds $1$ oz$.0\mathrm{.}53$ per oz$.0\mathrm{.}53$

$ $1\mathrm{.}93$

Direct labor:$*$

Mixing $1$ min. $14\mathrm{.}40$ per hr$.$ $ $0\mathrm{.}24$

Baking $2$ min. $24\mathrm{.}00$ per hr$.0\mathrm{.}80$

$ $1\mathrm{.}04$

Variable overhead$3$ min. $38\mathrm{.}40$ per direct$-$labor hr$.$ $ $1\mathrm{.}92$

Total standard cost per pound $ $4\mathrm{.}89$

$*$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$)410,000435,00025,000$ F

Revenue $ $3,690,000$ $ $3,871,500$ $ $181,500$ F

Direct material $ $791,300$ $ $1,055,450$ $ $264,150$ U

Direct labor $426,400413,92012,480$ F

Variable overhead $787,200816,77529,575$ 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 $4$

$4.$ What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report prepared for part $(1)?$ Calculate the total contribution margin variance by computing the following variances. $($Assume that all materials are used in the month of purchase.$).($Do not round your intermediate calculations. Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter $"0"$ for no effect $($i$.$e$.,$ zero variance$).)$Case $11\mathrm{.}55$ Part $4$

What is the total variance between the flexible budget contribution margin and the actual contribution margin in the new report

prepared for part $(1)?$ Calculate the total contribution margin variance by computing the following variances. $($Assume that all materials

are used in the month of purchase.$).($Do not round your intermediate calculations. Indicate the effect of each variance by selecting

"Favorable" or "Unfavorable". Select "None" and enter $"0"$ for no effect $($i$.$e$.,$ zero variance$).)$