In December of Year 2 operations (month 24), Memories, Inc. actually produced andsold 32,675 figurines, consisting of 30,570 dolls and 2,105 replicas. The budgeted salesprice for dolls was $5.00, and $5.25 for replicas. The estimated production and salesduring December was 31,678 dolls and 2,595 replicas.
Required:
A. Compute the price and volume variances for sales, assuming that MI sold allfigurines produced for $137,565 (dolls) and $9,051 (replicas). What might explain these variances?
B. Compute the price and quantity variances for direct materials for each type offigurine. MI paid $29,093 to purchase 32,325 units of raw materials for dolls and$1,453 to purchase 2,401 units of raw materials for replicas. (A unit consists ofplastic, molds, varnish, paint, and packaging materials.) From the materialspurchased, 30,995 units were used to produce the dolls and 2,149 were used toproduce the replicas. How would these variances be interpreted? What mighthave caused them? Would you consider them large enough to be important?
C. Compute the labor rate and efficiency variances for each type of figurine. MI paid$71,350 in labor costs for 7,150 direct labor hours for dolls and $6,425 in laborcosts for 650 direct labor hours for replicas. How would these variances beinterpreted? What might have caused them? Would you consider them largeenough to be important?
D. Assuming MI used a predetermined overhead rate of $2.13 per DLH, computethe variable overhead rate and efficiency variances. MI actually paid $20,852 intotal overhead costs, consisting of $17,002 of variable overhead and $3,850 offixed overhead. How would these variances be interpreted? What might havecaused them? Would you consider them large enough to be important?
E. How might MI extend its variance analysis to be compatible with activity-basedcosting if they decided to switch to that method?