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#### Information for Drone On Limited is shown below:     Per Unit Percentage of Sales Selling price \$ 1,150 100 % Variable expenses 690 60 % Contribution margin \$ 460 40 %   Total fixed expenses are \$70,000 per month, and the company is selling 1,400 drones per month

###### Accounting

Information for Drone On Limited is shown below:

Per Unit Percentage of Sales

Selling price \$ 1,150 100 %

Variable expenses 690 60 %

Contribution margin \$ 460 40 %

Total fixed expenses are \$70,000 per month, and the company is selling 1,400 drones per month.

Required:

1. The marketing manager argues that a \$5,200 increase in the monthly budget to prepare webinars would increase monthly sales by 50 drones. Should the webinar budget be increased?

Yes

No

2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by \$110 per unit. The marketing manager believes the higher-quality product would increase sales by 30% per month. Should the higher-quality components be used?

Yes

No

Exercise 10-28 Cost Variance Investigation (LO 10-4) The director of cost management for Odessa Company uses a statistical control chart to help manage- ment determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year. January February March \$250 F 800 U 700 U April May June \$ 900 U 1,050 U 1,200 U Chapter 10 Standard Costing and Analysis of Direct Costs 449 The standard direct-labor cost during each of these months was \$19.000. The controller has esti- mated that the firm's monthly direct-labor variances have a standard deviation of \$950. Required: 1. Draw a statistical control chart and plot the variance data given above. Which variances will be investigated? 2. Suppose the controller's rule of thumb is to investigate all variances equal to or greater than 6 per- cent of standard cost. Then which variances will be investigated? 3. Would you investigate any of the variances listed above other than those indicated by the rules dis- cussed in requirements (1) and (2) Why?

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