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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The solution provides a comprehensive variance analysis review.
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