Accounting Homework help

Individual Project 2

Variance Analysis – 25 points

Sarah’s Salad Supplier is a high-end producer of different pre-packaged salads that are sold to some of the best restaurants in the world. Following is the company’s April contribution report comparing budgeted and actual results for their chicken salad.

					Master
				Actual	Budget
	Chicken salad sold	24,700	25,000
	Revenues	494,000	500,000
	Direct materials:
		Chicken	204,930	210,000
		Salad Ingredients	133,425	135,000
		Salad Dressing	19,240	18,750
	Direct labor	38,400	40,000
	Variable overhead	51,800	50,000
	Total variable costs	447,795	453,750
	Contribution margin	46,205	46,250

Standard costs for one chicken salad are

Chicken 1.2 pounds @ $7.00/pound

Salad Ingredients 12 ounces @ $0.45/ounce

Salad Dressing 0.6 ounces @ $1.25/ounce

Direct labor $9.60/hour (10 minutes per unit at $0.16 per minute)

Variable OH $12.00/hour (10 minutes per unit at $0.20 per minute)

Variable overhead is applied on the basis of direct labor hours

Accounting and production records indicate that the company purchased and used the following quantities during the month.

		Purchased	Used
	Chicken	30,000	pounds	29,700	pounds
	Salad Ingredients	296,400	ounces	296,500	ounces
	Salad Dressing	15,000	ounces	14,800	ounces
	Direct labor			4,000	hours

REQUIRED

1. Prepare a contribution report showing

· Actual results

· Flexible budget - for the actual quantity of chicken salad sold

· Difference - between the actual and flexible budget amounts for each item shown on the report (indicate positive or negative for each)

Your report should look similar to the following.

				Flexible
			Actual	Budget	Difference
Chicken salad Sold
Revenues
Direct materials:
	Chicken
	Salad Ingredients
	Salad Dressing
Direct labor
Variable overhead
Total variable costs
Contribution margin

2. Calculate the following variances:

a. Material price variance – Chicken

b. Material quantity variance – Chicken

c. Material price variance – Salad Ingredients

d. Material quantity variance – Salad Ingredients

e. Material price variance – Salad Dressing

f. Material quantity variance – Salad Dressing

g. Labor rate variance

h. Labor efficiency variance

i. Variable overhead spending variance

j. Variable overhead efficiency variance

3. Name one possible cause for each of the non-zero material and labor variances calculated in part two. Be specific. Generic answers such as “they spent more on raw materials” will not receive credit.

To receive full credit:

· Your answers must be typed.

· You must provide supporting calculations for all figures.

(Calculations may be handwritten and attached on a separate page.)