Barrington Bears has developed the following sales forecasts for the next few months. January 500, February 600, March 720, April 800 and May 770. BB has 80 bears on hand on Dec. 31. Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs .8 yards of fabric and two pounds of stuffing. Fabric is budgeted to cost $15 per yard and stuffing $4 per pound. Direct labor is paid $18 per hour. Each bear takes 40 minutes to hand-finish. Variable overheads total $21 per direct labor hour. Fixed overheads amount to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end. Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
Assume that in March there was a favorable variance from the production master budget. Which factors may not have contributed to this result?

Question

Quizplus · Accepted Answer

A favorable variance from the production master budget means that the actual costs were less than the planned costs. Options A and B suggest that BB spent less on labor and wasted fewer materials, which would contribute to a favorable variance. Option D suggests that BB produced fewer units than planned, which could contribute to a favorable variance if the actual sales were also lower than planned. However, option C suggests that BB spent more on fixed overheads than planned, which would not contribute to a favorable variance. Therefore, option C may not have contributed to the favorable variance in March.

Barrington Bears Has Developed the Following Sales Forecasts for the Next