Question

The Sodus Company produces engine parts for car manufacturers. A now accountant intern at Sodus has accidentally deleted the calculations on the company's variance analysis calculations for the your unded December 31, 2017. The following table is what remains of the data. B (Click the icon to view the data.) Read the requirements. Requirement 1. Calculate all the required variances. If your work is accurate, you will find that the total static budget variance is $0.) Begin with the flexible budget columns, then the sales volume variance column. Label each variance as favorable (F) or unfavorable (U). (For variances with a $0 balance, make sure to enter "O' in the appropriate field. If the variance is zero, do not select a label. Round your answers to the nearest whole dollar) i Data Table Actual Flexible-Budget Flexible Results Variance Budget Units sold 110,000 Performance Report Revenues (sales) $ 687,500 Year Ended December 31, 2017 Variable costs 475,000 Actual Flexible-Budget Flexible Sales-Volume Static Contribution margin 212,500 Results Variances Budget Variances Budget Fixed costs 179,000 Units sold 110.000 95,000 Operating income Revenues (sales) $ 687.500 323,000 Variable costs 475,000 199,500 i Requirements Contribution margin 212.500 123,500 Fixed costs 179,000 90,000 1. Calculate all the required variances. (if your work is accurate, you will find that the total Operating income 33,500 33,500 static-budget variance is $0.) 2. What are the actual and budgeted selling prices? What are the actual and budgeted variable costs per unit? Print Done 3. Review the variances you have calculated and discuss possible causes and potential problems. What is the important lesson learned here? 33,500

Answer 1

Answer is given below

Sodus Company Flexible Budget Performance Report Year Ended December 31, 2017 Flexible Actual Flexible Budget Results Budget Variance 110,000 110,000 $687,500 $313,500F $374,000 $475,000 $244,000 $231,000 $212,500 $69,500 F $143,000 $179,000 $89,000 $90,000 $33,500 $19,500 $53,000 Sales Volume Sales Revenue Less: Variable cost Contribution Margin Less: Fixed Cost Operating Income Sales - Static Volume Budget Variance 95,000 $51,000 F $323,000 $31,500 ul $199,500 $19,5000 $123,500 $0 $90,000 $19,500 F $33,500 Sales Revenue Sales Volume Selling price per unit Actual Budgeted $687,500 $323,000 110,000 95,000 $3.40 $6.25 Variable cost Sales Volume Variable cost per unit $475,000 110,000 $4.32) $199,500 95,000 $2.10 3 Review of variances Actual Selling prices is far higher than the budgeted selling price. The marketing department has been able to sell at better prices and volume variance is also favourable Variables cost per unit is also higher than the budgeted variable cost. The actual cost of production is higher may be due to direct material and direct labor cost incurred. Hence the firm needs to review the cost and control the same Direct material and Direct labor variance should be analysed for price and efficiency variance Fixed cost is also higher than budget and is almost twice the static budget fixed cost Each component of cost needs to be reviewed to understand why the cost is higher. If sales dip in future there is higher chances of Operating Loss and Adverse variance