Homework Answers
| Ans. | Actual Results | Revenue & Spending variance | Flexible budget | Volume variance | Master Budget | |||
| Units | 42000 | 42000 | 40000 | |||||
| Sales | $2,688,000 | $42,000 | U | $2,730,000 | $130,000 | F | $2,600,000 | |
| Less: Variable cost | $1,806,000 | $84,000 | F | $1,890,000 | $90,000 | U | $1,800,000 | |
| Contribution margin | $882,000 | $42,000 | F | $840,000 | $40,000 | F | $800,000 | |
| Less: Fixed cost | $671,000 | $1,000 | U | $670,000 | $0 | none | $670,000 | |
| Operating income | $211,000 | $41,000 | F | $170,000 | $40,000 | F | $130,000 | |
| *Flexible budget is prepared on the basis of actual units. | ||||||||
| *Fixed expenses remain same as master budget. | ||||||||
| *Calculations for Sales: | ||||||||
| Actual results | Flexible budget | Master budget | ||||||
| Sales | 42,000 * $64 | 42,000 * $65 | 40,000 * $65 | |||||
| *Calculations for Variable cost: | ||||||||
| Actual results | Flexible budget | Master budget | ||||||
| Sales | 42,000 * $43 | 42,000 * $45 | 40,000 * $45 | |||||
| Revenue & Spending variance = Actual results - Flexible budget | ||||||||
| Activity variance = Flexible budget - Planning budget | ||||||||
| *Increase in expenses from flexible budget to actual results & Planning budget to flexible budget = Unfavorable. | ||||||||
| *Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget = Favorable. | ||||||||
| *Increase in sales or operating income from flexible budget to actual results and master budget to flexible budget = Favorable. | ||||||||
| *Decrease in sales or operating income from flexible budget to actual results and master budget to flexible budget = Unfavorable. | ||||||||
| Ans. 1 | Option 4th $81,000 Favorable | |||||||
| Master budget variance = Actual operating income - Master budgeted operating income | ||||||||
| $211,000 - $130,000 | ||||||||
| $81,000 | Favorable | |||||||
| Ans. 2 | Option 2nd $170,000 | |||||||
| Ans. 3 | Option 2nd $42,000 Unfavorable | |||||||
| Ans. 4 | Option 1st $90,000 Unfavorable | |||||||
| Volume variance = Flexible budget - Master budget | ||||||||
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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
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production and actual sales were 231,100 unit. The selling price
was $10.20 per unit. Variable costs were $5.60 per unit. Actual
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Required Prepare a profit variance analysis.
(Indicate the effect of each variance by selecting “F” for
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