Computing Activity Variance and Flexible Budget Variance

Burt's Bees, owned by the Clorox Company, manufacturers a number of skin products. Assume that the company compiled the following budgeted manufacturing cost information for a line of lip balm.

Management budgets production of $10,000$ cases for the month of June but actually produced $9,500$ cases. Actual costs were as follows: direct materials, $$150,800,$ direct labor, $$72,800$; variable overhead $$273,000$; and fixed costs, $$410,800.$

REQUIRED

a$.$ Prepare a variance analysis.

Note: Do not use negative signs with your answers.

b$.$ Analyze the activity variances and the flexible budget variances.

Activity variances:

variable costs based on

$$ production volume.

Flexible budget variances:

The flexible budget variance was unfavorable $v{v}^{}$ by $

$x.$ This was due to costs for direct materials and variable overhead which were over hat$(AA)$ budget. Direct labor and fixed overhead costs were

budget but not enough to offset the

manufacturing costs that were over hat$(AA)vv$ budget.

Overall, the variance was

by $

$\backslash$times $,$ made up of a

R offset by an $

$$ activity variance of $

oftset byan $$,x$

activity level of $9,500$ units, costs should have been $

The overall

variance of $$0$

should be investigated.