Chron Inc. manufactures hydroponic growing systems for the home organic gardener

Question

Chron Inc. manufactures hydroponic growing systems for the home organic gardener. In December, the company completed production of 3,200 units. The actual operating results follow 21,728.00 units produced deprec - equipment direct labor dollars direct material dollars factory insurance factory rent factory supervision indirect labor indirect material repairs & maintenance utilities 3,200 387,200.00 1,680,000.00 direct material quantity 56,000 ft 25,408.00 40,480.00 direct labor hours 49,664.00 23,936.00 sales price per unit 28,384.00 13,568.00 43,232.00 17,600 1,250.00 Management felt that this production run was exemplary and decided to use the per unit results as standards for future production runs. In March, the company completed another successful quarter. Actual operating results are given below deprec- - equipment direct labor dollars direct material dollars factory insurance factory rent factory supervision indirect labor indirect material repairs & maintenance utilities 3,600 24,444.00 units produced 433,116.00 1,911,600.00 direct material quantity 64,800 ft 28,542.00 45,540.00 direct labor hours 52,206.00 25,877.00 sales price per unit 30,841.00 19,080 1,250.00 8,229.00 49,533.00

Explanation / Answer

The fixed budget variance analysis report for SG&A items is prepared as below:

____

Notes:

1) Positive variances indicate that actual costs are higher than costs at different operating capacity levels. That is the variances are unfavorable.

2) Negative variances indicate that actual costs are lower than costs at different operating capacity levels. That is the variance are favorable.

Fixed Budget Variance Analysis Report Actual 70% Variance 80% Variance 90% Variance order processing 38,500 30,800 (4,000*70%*11) 7,700 35,200 (4,000*80%*11) 3,300 39,600 (4,000*80%*11) -1,100 shipping 36,000 26,600 (4,000*70%*9.50) 9,400 30,400 (4,000*80%*9.50) 5,600 34,200 (4,000*90%*9.50) 1,800 advertising expense 346,000 3,00,000 46,000 300,000 46,000 300,000 46,000 sales salaries 280,000 280,000 0 280,000 0 280,000 0 commission 225,000 175,000 (4,000*70%*1,250*5%) 50,000 200,000 (4,000*80%*1,250*5%) 25,000 225,000 (4,000*90%*1,250*5%) 0 accounting 162,500 165,000 -2,500 165,000 -2,500 165,000 -2,500 executive salaries 302,000 295,000 7,000 295,000 7,000 295,000 7,000 admin salaries 147,500 145,800 1,700 145,800 1,700 145,800 1,700

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