Question

Cherokee Manufacturing Company established the following standard price and cost data:

Sales price	$	12.00	per unit
Variable manufacturing cost	$	7.20	per unit
Fixed manufacturing cost	$	3,600	total
Fixed selling and administrative cost	$	1,200	total

Cherokee planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units.

Assume that the actual sales price is $11.76 per unit and that the actual variable cost is $6.90 per unit. The actual fixed manufacturing cost is $3,000, and the actual selling and administrative costs are $1,230.

Required

a.&b. Determine the flexible budget variances and classify 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

Cherokee Manufacturing Company Flexible Budget Variances Actual Flexible Budget Results Variance 2200 Flexible Budget 2200 Units sold Sales revenue Variable manufacturing cost Contribution margin Fixed manufacturing cost Fixed selling and administrative cost Net income (loss) 25872 15180 10692 3000 1230 6462 528 660 132 600 TCT-C 26400 15840 10560 3600 1200 5760 30 702 Actual Results: Sales revenue = 2,200 * $11.76 = $25,872 Variable manufacturing cost = 2,200 * $6.90 = $15,180 Flexible Budget: Sales revenue = 2,200 * $12.00 = $26,400 Variable manufacturing cost = 2,200 * $7.20 = $15,840