Solved: Luster Inc produces the basic fillings used in many

popular
Luster Inc produces the basic fillings used in many popular

Luster, Inc., produces the basic fillings used in many popular frozen desserts and treats—vanilla
and chocolate ice creams, puddings, meringues, and fudge. Luster uses standard costing and
carries over no inventory from one month to the next. The ice-cream product group’s results for
June 2014 were as follows:

Sam Adler, the business manager for ice-cream products, is pleased that more pounds of ice
cream were sold than budgeted and that revenues were up. Unfortunately, variable
manufacturing costs went up, too. The bottom line is that contribution margin declined by $
63,000, which is less than 3% of the budgeted revenues of $ 1,976,500. Overall, Adler feels that
the business is running fine.

Required
1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, and
contribution margin. What percentage is each static-budget variance relative to its static-budget
amount?
2. Break down each static-budget variance into a flexible-budget variance and a sales-volume
variance.
3. Calculate the selling-price variance.
4. Assume the role of management accountant at Luster. How would you present the results to
Sam Adler? Should he be more concerned? If so,why?

Luster Inc produces the basic fillings used in many popular

ANSWER
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