Question

Jordan Publications established the following standard price and costs for a hardcover picture book that the company produces $ Standard price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Planned fixed costs Manufacturing overhead Selling, general, and administrative 36.90 8.50 4.10 6.20 6.60 $132,000 49,000 Jordan planned to make and sell 30,000 copies of the book. Required: a. . d. Prepare the pro forma income statement that would appear in the master budget and also flexible budg income statements, assuming production volumes of 29,000 and 31,000 units. Determine the sales and variab cost volume variances, assuming volume is actually 31,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) Volume Variances Master Budget 30,000 Flexible Budgets 29,000 31,000 Number of units Variable manufacturing costs Fixed costs

Answer 1

Particulars	Rate	Master Budget	Flexible Budget		Volume Variances
Number of Units		30000	29000	31000	29000	31000
Variable Manufacturing Cost
Material Cost	8.5	255000	246500	263500	8500	8500
Labour Cost	4.1	123000	118900	127100	4100	4100
Direct Cost (A)		378000	365400	390600
Over Head Cost	6.2	186000	179800	192200	6200	6200
Selling,General and Administrative Cost	6.6	198000	191400	204600	6600	6600
Indirect Cost (B)		384000	371200	396800
Planned Fixed Costs
Manufacturing Overhead		132000	132000	132000	0	0
Selling,General and Administrative		49000	49000	49000	0	0
Fixed Cost ( C )		181000	181000	181000
Total Cost (A+B+C)		943000	917600	968400
Sales	36.9	1107000	1070100	1143900
Profit		164000	152500	175500
Profit %		17.39130435	16.61944202	18.12267658	Unfavourable	Favourable

Please go through the above table which shows if we produce 31000 copies of books, profit margin is increased.

So, 31000 copies of books are produced favourable.