Question

Below is TeaSpot's July contribution report, comparing budgeted and actual results for its tie-dyed t-shirt.

	Actual	Master Budget
# of Tie-Dyed Shirts Sold	217,000 shirts	215,000 shirts
Sales Revenue	$ 5,989,200	$ 5,934,000
Direct Materials:
White Shirts	592,410	591,250
Rubber Bands	22,785	17,200
Drying Bags	39,060	32,250
Direct Labor	1,085,000	774,000
Variable Overhead	781,200	696,600
Total Variable Costs	2,520,455	2,111,399
Contribution Margin	3,468,745	3,822,700

Standard Costs for one tie-dyed shirt:

White Shirts	1 shirt at $2.75 per shirt
Rubber Bands	4 bands at $0.02 per band
Drying Bags	1 bag at $0.15 per bag
Direct Labor	18 minutes per shirt at $12.00 per hour
Variable Overhead	18 minutes per shirt at $0.18 per direct labor minute
	Variable Overhead is applied on the basis of direct labor hours.

Records show that the company purchased and used the following quantities to produce 217,000 tie-dyed shirts:

White Shirts	227,850 white shirts
Rubber Bands	1,519,000 bands
Drying Bags	195,300 bags
Direct Labor	4,340,000 minutes

1. Prepare a contribution report and use formulas wherever possible.

Template for contribution report:

	Actual	Flexible Budget	Flexible Budget Variance
			Amount & F/U
# of Tie-Dyed Shirts Sold
Sales Revenue
Direct Materials
White Shirts
Rubber Bands
Drying Bags
Direct Labor
Variable Overhead
Total Variable Costs
Contribution Margin

Answer 1

Contribution report
	Actual $	Flexible Budget $	Flexible Budget	Variance	F/U
			Working	Amount $
# of Tie-Dyed Shirts Sold	217,000	217,000
Sales Revenue	5,989,200	5,989,200	(5,934,000 x 217,000 )/ 215,000	-
Direct Materials
White Shirts	592,410	596,750	(217,000 x 1 x 2.75 )	4,340	F
Rubber Bands	22,785	17,360	(217,000 x 4 x 0.02 )	5,425	U
Drying Bags	39,060	32,550	(217,000 x 1 x 0.15 )	6,510	U
Direct Labor	1,085,000	781,200	(217,000 x 18/60 x 12 )	303,800	U
Variable Overhead	781,200	703,080	(217,000 x 18 x 0.18 )	78,120	U
Total Variable Costs	2,520,455	2,130,940		389,515	U
Contribution Margin	3,468,745	3,858,260		389,515	U