Question

Benson 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 36.20 8.30 4.30 5.60 6.40 $ 134,000 52,000 Benson planned to make and sell 36,000 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 35,000 and 37,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 37,000 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 36,000 Flexible Budgets 35,000 Number of units 37,000 Variable manufacturing costs 000 Fixed costs 0 $ 0 $ 0

Answer 1

Particulars	P.U.	Master Budget	Flexible Budgets		Volume Variance	Favorable/Unfavorable
Number of Units		36,000	35,000	37,000	1,000	Favorable
Sales @ 36.20	36.20	1,303,200	1,267,000	1,339,400	36,200	Favorable
Variable Manufacturing Costs:
Materials Cost @ 8.30	8.30	298,800	290,500	307,100	8,300	Favorable
Labor Cost @ 4.30	4.30	154,800	150,500	159,100	4,300	Favorable
Overhead Cost @ 5.60	5.60	201,600	196,000	207,200	5,600	Favorable
Selling,General & Administrative Cost @ 6.40	6.40	230,400	224,000	236,800	6,400	Favorable
Total Variable Cost	24.60	885,600	861,000	910,200	24,600	Favorable
Contribution:	11.60	417,600	406,000	429,200	11,600	Favorable
Fixed Costs:
Manufacturing Overhead		134,000	134,000	134,000	-
Selling,General & Administrative		52,000	52,000	52,000	-
Total Fixed Cost		186,000	186,000	186,000	-
Net Profit		231,600	220,000	243,200	11,600	Favorable