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Delcatty Design Company manufactures expensive brass doorknobs. It has total assets amounting to 2,500,000 and liabilities of 1,500,000.

The fixed cost of producing and marketing the doorknob is 250,000. The variable costs per unit are the manufacturing costs (materials, labor, and overhead) and marketing costs of 500 per unit. The normal selling price of a doorknob is 2,200.

After careful study of the production, it was determined that manufacturing overhead was closely related to material usage. Thus, manufacturing overhead to production is allocated based on pounds of materials used.

The following are the production STANDARDS:

Direct Material (brass)

• Input: 0.3 lbs.at 117/ lb
• Cost/Doorknob: 35.10

Direct Labor

• Input: 0.75hrs.at 200/ hr.
• Cost/Doorknob: 150.00

Variable Manufacturing overhead

• Input: 60 / lb.x 0.3 lb.
• Cost/Doorknob: 18.00

ACTUAL results for July 2017 are as follows:

Production: 35,000 doorknobs

Direct Material Purchased: 10,550 lb.at 120/ lb.

Direct Materials Used: 10,400 lbs.

Direct Labor: 26,225hrs. for 5,271,200

Variable Manufacturing overhead: 641,500

As a managerial accountant and business analyst for Delcatty, the undertakings are as follows:

A.Flexible-budget variances. Ascertain whether each is favorable (F) or unfavorable (U) and recommendations for improvement.

(1)Materials Price Variance_________________

(2)Raw Materials Inventory_________________

(3)Materials Quantity/ Usage Variance _________________

(4)Labor Rate Variance _________________

(5)Labor Efficiency Variance _________________

(6)Variable MOH Rate Variance _________________

(7)Variable MOH Efficiency Variance: _________________

B. Analysis: For interim solutions, use 5 decimal places (d.p.)

(8)________________% is the normal contribution margin percentage.(round-off to 2 d.p.)

(9)________________units must be sold to break even.

(10)________________units must be sold earn a profit of 2 million

(11)_____________; _________%; ___________ units-the Margin of Safety (MoS) if 1,200 units are sold

(12)________________ Degree of Operating Leverage (DOL) if 500 units are sold(round-off to 2 d.p.)

(13)________________ % ROI if 500 units are sold(round-off to 2 d.p.)

(14)_______________ Unit Selling Price if the target contribution margin percentage is 75%(round-off to nearest peso)

C. Special order. An order has been received from an overseas customer for 1,000 units to be delivered this month. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable marketing cost would be 20% less per unit on this order than on normal sales.

Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is at a discounted price of 25% less than its normal selling price per unit.

(15) By how much would this special-order increase (decrease) the company's net operating income for the month? _________________

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