Question

Amerfond, Inc. produced the basic fillings used in mango popular frozen desserts and treats--vanilla and chocolate ice creams, puddings, meringues, and fudge. Amerfond used standard costing and Carrie's over no inventory from one month to the next. The ice cream product groups results for June 2017 were as follows:

Performance Report, June 2017 Actual Results 360,000 Static Budget 348,000 Units (pounds) Revenues 1,839,600 $ 1,400,400 Variable manufacturing costs 1,809,600 1,322,400 487 200 439,200 $ Contribution margin Jorge Efron, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs went up, too. The bottom line is that contribution margin declined by $48,000, which is less than 3% of the budgeted revenues of $1,809,600. Overall, Efron feels that the business is running fine. Print Done

1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, and contribution margin. What percentage is each static-budget variance relative to its static-budget amount?
2. Break down each static-budget cariance into flexible-budget variance and a sales-volime variance.
3. Calculate the selling-price variance.
4. Assume the role of management accountant of Amerfond. How would him present the results to Jorge Efron? Should he be more concerned? If so, why?

Answer 1

Requirement 1 & 2
	Actual (1)	*Flexible Budget(2)	Static budget(3)	Flexible Budget Variance (4) =(1)-(2)		Sales volume variance(5)=(2)-(3)		Static budget (6)= (1)-(3)		Statis Budget Variance(7)=(6)/(3)
Unit (pound)	360,000	360,000	348,000			12,000	F	12,000	F	3.45%
Revenue	1,839,600	1,872,000	1,809,600	32,400	U	62,400	F	30,000	F	1.66%
variable manufacturing cost	1,400,400	1,368,000	1,322,400	32,400	U	45,600	U	78,000	U	5.90%
Contribution Margin	439,200	504,000	487,200	64,800		16,800	F	48,000	U	9.85%
budgeted selling price per unit =1,809,600/348,000
Budget selling price = 5.20			5.20
budgeted variable manufacturing cost per unit =1,322,400/348,000
Budget selling price = 3.80			3.80
*Flexible Budget:
Revenue	=360000*5.2	1,872,000
variable manufacturing cost	=360000*3.8	1,368,000

Answer 3)

The selling price variance, is the difference between the actual and budgeted selling price,is the flexible budget variance in revenue = $32,400 (U)

Answer 4)

The flexible budget variances shows that for the actual sales volume of 360,000 pounds, selling price were lower and costs per pound is higher.

The favorable sales volume variance in revenue (because more pounds of ice cream were sold than budgeted) helped offset the unfavorable variable cost variance. jorge effon should be more concerned because the static budget variance in contribution margin is $48,000(U) is actually made up of a favorable sales volume variance in contribution margin of 16,800 an unfavorable selling price variance of 32,400 and an unfavorable variable manufacturing cost variance 32,400.

Jorge Effon should analyse why each of these variance occurred and the relationship among them. Could the efficiency of variable manufacturing cost be improved.The sales volume appears to have increased due to the lower average selling price per pound