Question

Problem 15-21 Determining and interpreting flexible budget variances LO 15-5

Baird Publications established the following standard price and costs for a hardcover picture book that the company produces.

Standard price and variable costs
Sales price	$	36.90
Materials cost		8.60
Labor cost		3.60
Overhead cost		5.90
Selling, general, and administrative costs		7.00
Planned fixed costs
Manufacturing overhead	$	128,000
Selling, general, and administrative		53,000

Assume that Baird actually produced and sold 27,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price	$	35.90
Materials cost		8.80
Labor cost		3.50
Overhead cost		5.95
Selling, general, and administrative costs		6.80
Actual fixed costs
Manufacturing overhead	$	113,000
Selling, general, and administrative		59,000

Required

a. & b. Determine the flexible budget variances and also indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Flexible Budget Variances Sales revenue Variable manufacturing costs Materials Labor Overhead Selling, general,and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general, and administrative costs Net income

Answer 1

				27000	27000
				Actual	Flexible	Flexible budget
						variance
Sales revenue				969300	996300	27000	U
Variable manufacturing costs
materials				237600	232200	5400	U
labor				94500	97200	2700	F
overhead				160650	159300	1350	U
Selling.general & administrative costs				183600	189000	5400	F
contribution margin				292950	318600	25650	U
fixed costs
manufacturing overhead				113,000	128,000	15,000	F
Selling.general & administrative costs				59,000	53,000	6,000	U
net income				120,950	137,600	16,650	U