The Hockey Helmet Company expects increased demand for its hockey helmets at the beginning of hockey season in September.
Here is the projected data for September:
The Hockey Company
Variable Costs Total
Fixed Costs Total
Direct manufacturing labor
Indirect manufacturing labor
Factory Insurance & Utilities
Depreciation ? Machinery and factory
Repairs and maintenance ? factory
General and administrative expenses
Variable Cost and Volume Data
Raw materials = 3.25 lbs. x $10.00/lb.
Direct Labor = 1.7 hr. x $10/hr.
Volume in units
Sales price per helmet is $90.
In good form in Microsoft Excel perform the following tasks:
1. Prepare the static budget operating income in contribution format.
2. If sales demand increases to 11,500 units for September, prepare the flexible budget for September in contribution format to reflect the new data.
3. Compute and reconcile the sales volume variance, indicating whether the variance is favorable or unfavorable.
4. Given the following additional actual data:
Total Direct Costs Incurred for September
Raw Materials =35,100 lbs. used
Direct Labor =18,360 hrs. incurred
Volume in units
5. Using the three-prong method to present your calculations, compute the direct materials price variance, the direct materials efficiency variance, the labor price variance, and the labor efficiency variance, indicating whether these are favorable or unfavorable.
6. Below each variance calculation neatly provide one possible explanation for each of the variances.
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