Colonial Cookies, Inc., 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 $10.00 per pound. The standard cost per pound of chocolate nut supreme, based on Colonial’s normal monthly production of 300,000 pounds, is as follows:

Cost Item	Quantity			Standard Unit Cost			Total Cost
Direct materials:
Cookie mix		10	oz.	$	.03	per oz.	$	.30
Milk chocolate		5	oz.		.16	per oz.		.80
Almonds		1	oz.		.51	per oz.		.51
							$	1.61
Direct labor:*
Mixing		1	min.		14.40	per hr.	$	.24
Baking		2	min.		18.00	per hr.		.60
							$	.84
Variable overhead†		3	min.		32.40	per direct-labor hr.	$	1.62
Total standard cost per pound							$	4.07

*Direct-labor rates include employee benefits.

†Applied on the basis of direct-labor hours.

Colonial’s management accountant, Karen Blair, prepares monthly budget reports based on these standard costs. February’s contribution report, which compares budgeted and actual performance, is shown in the following schedule.

Contribution Report for February
	Static Budget			Actual			Variance
Units (in pounds)		300,000			325,000			25,000	F
Revenue	$	3,000,000		$	3,217,500		$	217,500	F
Direct material	$	483,000		$	678,450		$	195,450	U
Direct labor		252,000			251,400			600	F
Variable overhead		486,000			678,799			192,799	U
Total variable costs	$	1,221,000		$	1,608,649		$	387,649	U
Contribution margin	$	1,779,000		$	1,608,851		$	170,149	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 February
Cost Item	Quantity			Actual Cost
Direct materials:
Cookie mix		3,325,000	oz.	$	99,750
Milk chocolate		1,930,000	oz.		405,300
Almonds		340,000	oz.		173,400
Direct labor:
Mixing		325,000	min.		78,000
Baking		578,000	min.		173,400
Variable overhead					678,799
Total variable costs				$	1,608,649

rev: 10_07_2015_QC_CS-27359, 10_08_2015_QC_CS-27359

Case 11-55 Part 1

Required:
1.	Prepare a new contribution report for February, 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.
	(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).)

Flexible Budget	Actual	Variance
Units (in pounds)
Revenue
Direct material
Direct labor
Variable overhead
Total variable costs
Contribution margin

.	What is the total contribution margin in the flexible budget column of the new report prepared for part (1)? (Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount.)

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).)

a.	Direct-material price variance.
b.	Direct-material quantity variance.
c.	Direct-labor rate variance.
d.	Direct-labor efficiency variance.
e.	Variable-overhead spending variance.
f.	Variable-overhead efficiency variance.
g.	Sales-price variance.
	Total

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