Question

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	$	36.20
Materials cost		8.10
Labor cost		3.90
Overhead cost		5.60
Selling, general, and administrative costs		6.20
Planned fixed costs
Manufacturing overhead	$	133,000
Selling, general, and administrative		45,000

Baird planned to make and sell 24,000 copies of the book.

Required:

a. - d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 23,000 and 25,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 25,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

	Master Budget Flexible Budgets Volume Variances Number of units 24,000 23,000 25,000 Variable manufacturing costs Fixed costs

Answer 1

Hi, Below is the answer:

Particulars	Master Budget	Flexible Budget		Volume Variance
	24,000	23,000	25,000	(All Favorable)
Variable Manufacturing Cost
Material Cost	1,94,400	1,86,300	2,02,500	8,100	F
Labour Cost	93,600	89,700	97,500	3,900	F
Overhead cost	1,34,400	1,28,800	1,40,000	5,600	F
Selling, General and Admin	1,48,800	1,42,600	1,55,000	6,200	F
Fixed Costs
Manufacturing Overhead	1,33,000	1,33,000	1,33,000	None
Selling, General and Admin	45,000	45,000	45,000	None
Total Cost	-7,49,200	-7,25,400	-7,73,000	None
Total Sales	8,68,800	8,32,600	9,05,000	36,200	F
Profit	1,19,600	1,07,200	1,32,000

Formula for Volume variance is (Actual qty - Budgeted Qty) * Budgeted price per unit.