Variance Analyses for Direct Materials and Labor

  
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

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Fixed Costs Total
 
Raw materials

$ 325,000
 
Direct manufacturing   labor

$ 170,000
 
Indirect manufacturing   labor

$ 22,500
 
Factory Insurance &   Utilities

$ 34,000
 
Depreciation ?   Machinery and factory

$ 18,500
 
Repairs and maintenance   ? factory

$ 17,000
 
Distribution expenses

$ 20,000

$ 40,000
 
General and   administrative expenses

$ 30,000
  
Variable Cost and Volume Data
 
Raw materials = 3.25 lbs. x $10.00/lb.

$ 32.50
 
Direct Labor = 1.7 hr. x $10/hr.

$ 17.00
 
Volume in units

10,000
Sales price per helmet is $90.
Required elements:
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

$   351,000
 
Direct   Labor =18,360 hrs. incurred

$   183,600
 
Volume   in units

10,800
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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