Question

Zachary 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 36.30 8.10 3.50 6.20 7.10 $ 130,000 52,000 Assume that Zachary actually produced and sold 25,000 books. The actual sales price and costs incurred follow: $ Actual price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Actual fixed costs Manufacturing overhead Selling, general, and administrative 35.30 8.30 3.40 6.25 6.90 $115,000 58,000 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).)

Answer 1

Solutions Given that produced & sold 25,000 Determine aq b budget variance. Sales revenue - 25,000 variable manufacturing costs Materials = (b material cost - a material cost)x25000 0-8.10) x 25000 - 5000 calabor cost - b labor cost) $25000 Labore = (3.50-3.40) X 25000 10 X 25000 = 2500 Overhead = (boverhead cost na overhead cost)x25000 (6.25-6-20) x25000 = 005 X2500 1250 Selling general, & administrative cost = (1.10-6.90) %25000 = 20%25000 = 5000

Flexible budget variance. Sales revenue 25,000 Variable manufacturing costs Materials 5,000 labor 2500 Over head 1250 administrative Selling general Costs 5000 Contribution Margin 23750 Fixed Costs Manufacturing over head 15,000 6,000 selling, general e administrative costs. Net Income 14750 Net Income - Contribution Margin - manufacturing Overhead + Selling, general & administrative wst' - 23750 - 15000 + 6000 - 14750.