Question

Problem 15-20 Determining sales and variable cost volume variances LO 15-2, 15-3, 15-4 Vernon Publications established the following standard price and costs for a hardcover picture book that the company produces. $ 36.60 8.50 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 3.80 5.60 6.40 $129,000 50,000 Vernon planned to make and sell 31,000 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 30,000 and 32,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 32,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (.e.. zero variance).)

Answer 1

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		Budget amount per unit	Master Budget	Flexible Budget		Volume Variance
	Units	(q)	31,000	30,000	32,000
	Sales Revenue	$    36.60	$ 11,34,600	$10,98,000	$11,71,200	$       36,600	F
Less:	Variable Manufacturing costs:
	Material	$       8.50	$   2,63,500	$   2,55,000	$   2,72,000	$         8,500	U
	Labor	$       3.80	$   1,17,800	$   1,14,000	$   1,21,600	$         3,800	U
	Manufacturing overheads	$       5.60	$   1,73,600	$   1,68,000	$   1,79,200	$         5,600	U
	Variable selling general and administrative cost	$       6.40	$   1,98,400	$   1,92,000	$   2,04,800	$         6,400	U
	Contribution margin		$   3,81,300	$   3,69,000	$   3,93,600	$       12,300	F
Less:	Fixed Expenses
	Manufacturing overheads		$   1,29,000	$   1,29,000	$   1,29,000	$                -	None
	Fixed selling general and administrative cost		$       50,000	$      50,000	$      50,000	$                -	None
	Net Income		$   2,02,300	$   1,90,000	$   2,14,600	$       12,300	F