Connor Company's budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attaché case are $ 40, $ 8, and $ 12, respectively. The president is pleased with the following performance report:
|
Actual Costs
|
Static Budget
|
Variance
|
|
Direct materials
|
$ 370,000
|
$ 400,000
|
$ 30,000
|
|
Direct manufacturing labor
|
80,000
|
80,000
|
0
|
|
Direct marketing ( distribution) labor
|
108,000
|
120,000
|
12,000
|
Actual output was 8,700 attaché cases. Assume all three direct-cost items shown are variable costs. Required is the president's pleasure justified? Prepare a revised performance report that uses a flexible budget and a static budget.