Materials glass cloth 120.00 sq. ft. @ $ 2.00 $ 240.

00
Glass mix 40.00 lbs @ $ 3.75 $ 150.00
Direct labor Mixing 0.50 hr. @ $ 20.25 $ 10.13
Molding 1.00 hr. @ $ 20.25 $ 20.25
Indirect Cost Absorb at 24.30 per hull $ 24.30
Total Cost to mold hull $ 444.68

Materials:
Purchased glass cloth 60,000.00 sq. ft. @ $ 1.80 $ 108,000.00
Glass mix 20,000.00 lbs @ $ 4.09 $ 81,800.00
Used glass cloth 54,000.00 sq. ft. @ $ -
Glass mix 19,000.00
Direct labor Mixing 210.00 hr. @ $ 21.37 $ 4,487.70
Molding 480.00 hr. @ $ 20.25 $ 9,720.00
Overhead Incurred $ 111,140.00

Not only did you sell 20 less units than budgeted, which reduced your gross profit by
$18,000, but you had significant variances. These variances reduced your gross profit
by an additional $9,000. You will notice that although the gross margin drops only 1%
due to these variances, gross profit per unit drops by $21. This amount may seem
small, but every dollar matters.

In summary, SunAir Boat Builders has significant variances in the costs of its
operations. There are several steps that can be taken to improve these variances,
which will ultimately help improve the bottom line for the company.
In summary, SunAir Boat Builders has significant variances in the costs of its
operations. There are several steps that can be taken to improve these variances,
which will ultimately help improve the bottom line for the company.
 Materials Glass Cloth
Glass Mix

You will notice that the majority of the variances are unfavorable. The
unfavorable price variances could be a result of poor purchasing decisions. The
favorable price variance for glass cloth appears to be due to purchasing in bulk,
so you could potentially implement this purchasing behavior to lower the
unfavorable variances. You will also notice the usage variance for materials is
quite unfavorable. You should instruct your supervisors to more carefully
monitor the amount of materials being used and possibly develop a system to
standardize the amounts of materials being used for your boats. I am not so
concerned with the overhead variance since the total number of hours worked
were 690 compared to the 645 budgeted. If you fix the variance associated with
labor usage, the overhead variance should become more favorable
 Price
AQAP AQSP SQSP Variance Usage Variance
97200 108000 120000 10800 12000