Kaufmann Manufacturing Company Essay

Answer#1
First Six-Months
Price Variance Efficiency Variance Sales-Volumn Variance
AQ*AP AQ*SP SQ*SP Static Q*SP
Raw Materials 590000*3.867=2281000 79000F 590000*4=2360000 104000U 188000*3*4=2256000 144000F 200000*3*4=2400000
Direct Labor 400000*11=4400000 $- 400000*11=4400000 264000U 188000*2*11=4136000 264000F 200000*2*11=4400000
Spending Variance Efficiency Variance Never a Variance
Actual Input Quantity*AR Actual Input Quantity*SR Flexible:Budgeted Input Quantity Allowed for Actual Output*SR Allocated:Budgeted Input Quantity Allowed for Actual Output*SR
Indirect Labor 400000*2.7=1080000 $- 400000*2.7=1080000 64800U 188000*2*2.7=1015200 $- 188000*2*2.7=1015200
Supplies 400000*0.175=70000 $- 400000*0.175=70000 4200U 188000*2*0.175=65800 $- 188000*2*0.175=65800
Power 400000*3=1200000 $- 400000*3=1200000 72000U 188000*2*3=1128000 $- 188000*2*3=1128000
Spending Variance Never a Variance Volumn Variance
Actual Costs Incurred Static Budget Costs Flexible:Static Budget Costs Allocated:Budgeted Input Quantity Allowed for Actual Output*SR
Maintenance $2,172,000 122000U $2,050,000 $- $2,050,000 123000U 188000*10.25=1927000
Supervision $1,800,000 130000F $1,930,000 $- $1,930,000 115800U 188000*9.65=1814200
Depreciation $1,460,000 $- $1,460,000 $- $1,460,000 87600U 188000*7.3=1372400
Insurance $353,000 3000U $350,000 $- $350,000 21000U 188000*1.75=329000
Second Six-Months
Price Variance Efficiency Variance Sales-Volumn Variance
AQ*AP AQ*SP SQ*SP Static Q*SP
Raw Materials 600000*4.05=2432000 32000U 600000*4=2400000 144000F 212000*12=2544000 144000U 200000*3*4=2400000
Direct Labor 425000*11.325=4813000 138000U 425000*11=4675000 11000U
212000*22=4664000 264000U 200000*2*11=4400000
Spending Variance Efficiency Variance Never a Variance
Actual Input Quantity*AR Actual Input Quantity*SR Flexible:Budgeted Input Quantity Allowed for Actual Output*SR Allocated:Budgeted Input Quantity Allowed for Actual Output*SR
Indirect Labor 425000*2.69=1143000 4500F 425000*2.7=1147500 2700U 212000*5.4=1144800 $- 212000*5.4=1144800
Supplies 425000*0.19=76000 1625U 425000*0.175=74375 175U 212000*0.35=74200 $- 212000*0.35=74200
Power 425000*2.998=1274000 1000F 425000*3=1275000 3000U 212000*6=1272000 $- 212000*6=1272000
Spending Variance Never a Variance Volumn Variance
Actual Costs Incurred Static Budget Costs Flexible:Static Budget Costs Allocated:Budgeted Input Quantity Allowed for Actual Output*SR
Maintenance $1,676,000 374000F $2,050,000 $- $2,050,000 123000F 212000*10.25=2173000
Supervision $1,930,000 $- $1,930,000 $- $1,930,000 115800F 212000*9.65=2045800
Depreciation $1,460,000 $- $1,460,000 $- $1,460,000 87600F 212000*7.3=1547600
Insurance $353,000 3000U $350,000 $- $350,000 21000F 212000*1.75=371000

Answer#2
Because operating costs in the second six-months went down greatly. Because the net sales were smaller than other expenses, such as SG&A expenses.

Answer#3
The sales manager did a bad job. Because of his decision of raising the price, sales revenue decrease from 19080000 to 17484000. The sales manager just looked at the difference between static budget and actual costs. Instead she should take a further look at the variances between flexible budget and actual costs.

Answer#4
The production manager make good use of raw materials in the second six-months, making an efficiency variance of 144000F. But the labor efficiency decreased. He should not make up his mistakes by decreasing the maintenance costs.

Answer#5
Price of raw materials went up, resulting in an unfavorable variance in raw material costs. Greatly improving raw material efficiency and labor efficiency resulted in a great decrease in production costs. Volumn Variance will fade away in a long period.