Question

Background Information Spitzer Specialty Furniture manufactures furniture for specialty shops throughout the Southwest. With annual sales of $12 million, the company has four major product lines-bookcases, magazine racks, end tables, and bar stools-each of which is managed by a different production manager. Since production is spread fairly evenly over the year, controller Sara Massey has prepared an annual budget that is divided into 12 monthly reporting periods. Spitzer uses a standard cost system and applies variable overhead on the basis of machine hours. Fixed manufacturing overhead is allocated to the product lines based on the square footage they occupy using a predetermined plantwide rate. The size of the occupied space varies considerably across product lines. At the monthly meeting to review June's results, Ken Ashley, manager of the bookcase line, received the following performance report: Spitzer Specialty Furniture, Bookcase Production Performance Report For the Month Ended June 30, Actual Budget Variance Units 3,000 2,500 500 F Sales Revenue $161,000 $137,500 $23,500 F Variable production expenses: Direct material 23,100 20,000 3,100 U Direct labor 18,300 15,000 3,300 U Overhead 60,200 51,250 8,950 u Fixed production expenses: Indirect labor 9,400 6,000 3,400 U Depreciation 5,500 5,500 Taxes 2,400 2,300 100 u Insurance 4,500 4,500 Administrative expense 12,000 9,000 3,000 U Marketing expense 8,300 7,000 1,300 U Research & development 6,000 4,500 1,500 u Operating profit $11,300 $12,450 ($1,150) U

Answer 1

H Actual 3000 161000 B C D E F G Spitzer Specialty Furniture Bookcase Production Performance Report For the Month Ended June 30 Planning Volume Flexible Spending 4. Particulars Budget Variance Budget Variance 5 Units 2500 3000 6 Sales revenue 137500 27500 F 165000 4000 U 7 Variable production expenses: 8 Direct material 20000 40000 24000 900/F 9 Direct labor 15000 30000 18000 300U 10 Overhead 51250 10250 U 61500 1300 F 11 Total variable production expenses 86250 17250U 103500 1900F 12 Contribution margin 51250 10250 F 61500 2100 U 13 Fixed production expenses: 14 Indirect labor 6000 0 None 6000 3400U 15 Depreciation 55001 0 None 55001 0 None 16 Taxes 2300 0 None 2300 1000 17 Insurance 4500 O None 45000 None 18 Administrative expense 9000 O None 9000 3000 U 19 Marketing expense 0 None 7000 1300U 20 Research & development 4500 0 None 4500 1500 U 21 Total fixed costs 38800 0 None 38800 9300U 22 Operating profit 12450 10250 F 22700 11400 U 231001 18300 60200 101600 59400 9400 5500 24001 4500 12000 83001 70001 6000 481001 113001