Question

The master budget at Western Company last period called for sales of 226,100 units at $10.10 each. The costs were estimated to be $3.86 variable per unit and $226,100 fixed. During the period, actual production and actual sales were 231,100 unit. The selling price was $10.20 per unit. Variable costs were $5.60 per unit. Actual fixed costs were $226,100.

Profit Variance Analysis Actual Budget Manufacturing Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget Sales revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profits

Required Prepare a profit variance analysis.

(Indicate the effect of each variance by selecting “F” for favorable, or “U” for unfavorable. If there is no effect, do not select either option.)

Answer 1

Western Company
Profit variance Analysis
	Actual	Manufacturing Variances		Sales Price Variance		Flexible Budget	Sales Activity Variance		MasterBudget
Selling units (q)	2,31,100					2,31,100			2,26,100
Selling price per unit (i)	$                10.20					$         10.10			$               10.10
Variable cost per unit (ii)	$                  5.60					$           3.86			$                 3.86
Sales Revenue (q x (i))	$       23,57,220			$                23,110	F	$23,34,110	$           50,500	F	$      22,83,610
Less Variable Expenses (q X (ii))	$       12,94,160	$   4,02,114	U			$   8,92,046	$           19,300	U	$         8,72,746
Contribution margin	$       10,63,060	$   4,02,114	U	$                23,110	F	$14,42,064	$           31,200	F	$      14,10,864
Less Fixed Expenses:	$          2,26,100	$                -	None			$   2,26,100	$                     -	None	$         2,26,100
Operating Profits	$          8,36,960	$   4,02,114	U	$                23,110	F	$12,15,964	$           31,200	F	$      11,84,764