The following questions are based on the Dominion Company data contained in Exhibit 8.1 (p. 330)…

The following questions are based on the Dominion Company data contained in Exhibit 8.1 (p. 330) and in the table near the top of p. 344.

1 Suppose actual production and sales were 8,000 units instead of 7,000 units. (a) Compute the sales-activity variance. Is the performance of the marketing function the sole explanation for this variance? Why? (b) Using a flexible budget, compute the budgeted contribution margin, the budgeted income, budgeted direct material and budgeted direct labour.

2 Suppose the following were the actual results for the production of 8,000 units. Direct materials: 42,000 pounds were used at an actual unit price of €1.86, for a total actual cost of €78,120. Direct labour: 4,140 hours were used at an actual hourly rate of €16.40, for a total actual cost of $67,896. Compute the flexible-budget variance and the price and quantity variances for direct materials and direct labour. Present your answers in the form shown in Exhibit 8.8, p. 347.

3 Evaluate the Dominion Company’s performance based on the variances you calculated in numbers 1 and 2.

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