Individual Project 2
Variance Analysis â 25 points
Due in class March 21st, 2016 (notice date change from the syllabus)
Sarahâs 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 companyâs April contribution report
comparing budgeted and actual results for their chicken salad.
Actual
24,700
Master
Budget
25,000
Revenues
494,000
500,000
Direct materials:
Chicken
Salad Ingredients
Salad Dressing
Direct labor
Variable overhead
204,930
133,425
19,240
38,400
51,800
210,000
135,000
18,750
40,000
50,000
Total variable costs
447,795
453,750
Contribution margin
46,205
46,250
Chicken salad sold
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.
Actual
Flexible
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 â Chicken
b. Material quantity variance â Chicken
c. Material price variance â Salad Ingredients
d. Material quantity variance â Salad Ingredients
e. Material price variance â Salad Dressing
f. Material quantity variance â 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 âthey spent more on raw materialsâ 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.)