Question

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 108,000 liters at a budgeted price of $135 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @ $8) (0.5 hours $32) $16 16 Variable overhead is applied based on direct labor hours. The variable overhead rate is $60 per direct labor hour. The fixed overhead rate (at the master budget level of activity) is $30 per unit. All non-manufacturing costs are fixed and are budgeted at $16 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $438,000 unfavorable. The following is the actual income statement in thousands of dollars) for the year. $13,998 1.528 1,050 970 Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Loss fixed costs Fixed manufacturing overhead Non manufacturing costs. Total fixed costs. Operating profit $10.450 1,090 1,270 52, 360 $3,00

Answer 1

Answer is given below

Paynesville Corporation Profit Variance Analysis Manufacturing Non- Sales Sales price Flexible Actual Variances Manufacturing Variance Budget Activity Variances Variance 102,478 102,478 $13,998 $144 $14,1421 $438 Master Budget Units Sales Revenue 108,000 $14,580 $1,528 $1,050 $970 $3,548 $10,450 $112 F $590 F $2,104 F $2,806 F $2,806 F $1,640 $1,640 $3,074 $6,354 $7,788 $88 F $88 F $166 F $342 F $960 $1,728 $1,728 $3,240 $6,696 $7,884 $144 Materials Direct Labor Variable Overhead Total Variable Costs Contribution Margin LESS: Fixed Cost Manufacturing Non-manufacturing Total Fixed Costs Operating Profits $2,150 F $0 $1,090 $1,270 $2,360 $8,090 $3,240 $1,600 $4,840 $2,948 $330 F $330F $330 F $3,240 $1,600 $4,840 $3,044 $2,150 F $4,956 F Sol $1440 $96 U