Reference no: EM132283486
Assignment Instructions -
1. Analyze each variance on the operating income reconciliation schedule on pg. 1. Your analysis should be supported by calculations. Explain why the variances occurred based on Gingerbread Dollhouse's information and business model. You should analyze the company's sales mix, direct and indirect manufacturing costs, as well as general selling & administrative expenses. You need to use the detailed information on pg. 2. All standard and actual costs should be considered in support of your analysis.
2. Based on your analysis, prepare a one page professional memo with three recommendations for Susan Smith on how to improve Gingerbread Dollhouse's performance.
In 1995, R.D. Smith, established Smith's Gingerbread Dollhouses Inc. The company assembles dollhouses which are sold in the United States. After her father-in-law's retirement in 2017, Susan Smith assumed control of the company. In 2018, Susan expected the company's operating income to increase because the company no longer had to pay R.D.'s salary of $125,000. Instead, the company's operating income decreased.
As Susan's accountant, you prepared operating income reconciliation from 2017 to 2018. As you are getting ready for a meeting with her, you need to explain the reasons why operating income decreased. Based on what you have learned (and still learning) this semester, evaluate the variances below.
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Gingerbread Dollhouses Inc. Operating Income Reconciliation 2017 - 2018
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Difference
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Operating Income 2017
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$1,857,600
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Total Sales Mix Variance
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(591,600)
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Manufacturing Variances:
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Direct Materials Variance
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Price
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$(256,000)
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Efficiency
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(22,000)
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Direct Labor Variance
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Rate
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(37,850)
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Efficiency
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(2,775)
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Variable Overhead Variance
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Spending
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(30,600)
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Total Manufacturing Variances
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$(349,225)
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Selling & General Administration
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125,000
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Operating Income 2018
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$1,041,775
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Attachment:- Assignment Files.rar
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