Required information 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) [The following information applies to the questions displayed below.] 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 $9.00 per pound. The standard cost per pound of chocolate nut supreme, based on Aunt Molly's normal monthly production of 290,000 pounds, is as follows: Cost Item Direct materials: Cookie mix Milk chocolate Almonds Direct labor:* Mixing Quantity Standard Unit Cost 10 oz. $ 0.02 per oz. 5 oz. 1 oz. 0.15 per oz. 0.50 per oz. Total Cost $0.20 0.75 0.50 $1.45 1 min. 14.40 per hr. $0.24 Baking 2 min. 18.00 per hr. 0.60 $0.84 Variable overhead+ 3 min. 32.40 per direct-labor hr. $1.62 Total standard cost per pound $3.91 *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 Units (in pounds) Revenue Direct material Direct labor Variable overhead Total variable costs Contribution margin Budget 290,000 $2,610,000 $ 420,500 Actual 315,000 $2,803,500 $ 603,500 Variance 25,000 F $193,500 F $183,000 U 243,600 469,800 $1,133,900 $1,438,617 $1,476,100 $1,364,883 $111,217 U 243,660 591,457 60 U 121,657 U $304,717 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. Cost Item Direct materials: Cookie mix Milk chocolate Almonds Usage Report for April Actual Cost Quantity 3,225,000 oz. $ 64,500 1,870,000 oz. 374,000 330,000 oz. 165,000 315,000 min. 75,600 Baking 560,200 min. 168,060 Variable overhead Total variable costs 591,457 $1,438,617 Direct labor: Mixing Case 11-55 Part 1 Required: 1. Prepare a new contribution report for April, 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 "O" for no effect (i.e., zero variance). Units (in pounds) Revenue Direct material Direct labor Variable overhead Total variable costs Contribution margin Flexible Budget Actual Variance 315,000 2,900,000 $ 315,000 2,803,500 $ 0 None 96,500 Unfavorable 603,500 Unfavorable Favorable Unfavorable Unfavorable Unfavorable