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    Comprehensive Variance Analysis Review

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    Sonnet, Inc. has the following budgeted standards for the month of March 2010:

    Average selling price per diskette $5.00
    Total direct material cost per diskette $0.85
    Direct manufacturing labor
    Direct manufacturing labor cost / hour $15.00
    Average labor productivity rate (disks / hour) 300
    Direct marketing cost per unit $0.30
    Fixed overhead $850,000

    Sales of 2,000,000 units are budgeted for March. Actual March results are:

    - Unit sales and production totaled 90% of plan
    - Actual average selling price declined to $4.80
    - Productivity dropped to 250 diskettes per hour
    - Actual direct manufacturing labor cost is $15 per hour
    - Actual total direct material cost per unit dropped to $0.80
    - Actual direct marketing costs were $0.30 per unit
    - Fixed overhead costs were $30,000 below plan

    Calculate the following:

    1. Static-budget and actual operating income
    2. Static-budget variance for operating income
    3. Flexible-budget operating income
    4. Flexible-budget variance for operating income
    5. Sales-volume variance for operating income
    6. Price and efficiency variances for direct manufacturing labor
    7. Flexible-budget variance for direct manufacturing labor

    * Complete in Excel.

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    Solution Summary

    The solution provides a comprehensive variance analysis review.