Question

Finch 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 36.30 8.30 4.00 6.30 6.80 $130,000 45,000 Assume that Finch actually produced and sold 34,000 books. The actual sales price and costs incurred follow: $ Actual price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Actual fixed costs Manufacturing overhead Selling, general, and administrative 35.30 8.50 3.90 6.35 6.60 $115,000 51,000

Answer 1

Ans.	FINCH   PUBLICATIONS
	Flexible Budget Variance
		Actual results	Flexible budget	Variances	Fav./ Unf.
	Sales	$1,200,200	$1,234,200	$34,000	U
	Less: Variable costs:
	Materials	$289,000	$282,200	$6,800	U
	Labor	$132,600	$136,000	$3,400	F
	Overhead	$215,900	$214,200	$1,700	U
	Selling, general and administration	$224,400	$231,200	$6,800	F
	Total variable cost	$861,900	$863,600	$1,700	F
	Contribution margin	$338,300	$370,600	$32,300	U
	Less: Fixed costs:
	Manufacturing overhead	$115,000	$130,000	$15,000	F
	Selling, general and administration	$51,000	$45,000	$6,000	U
	Total fixed cost	$166,000	$175,000	$9,000	F
	Income from operations	$172,300	$195,600	$23,300	U
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	*Calculation of Actual results and Flexible budget:
		Actual results	Flexible Budget
	Books produced and sold	34,000	34,000
	Sales	34,000 * $35.30	34,000 * $36.30
	Less: Variable costs:
	Materials	34,000 * $8.50	34,000 * $8.30
	Labor	34,000 * $3.90	34,000 * $4
	Overhead	34,000 * $6.35	34,000 * $6.30
	Selling, general and administration	34,000 * $6.60	34,000 * $6.80
	*Increase in revenue or net operating income and decrease in expenses from flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from flexible budget to actual results =   Unfavorable.
	Flexible budget variance   =   Actual results - Flexible budget