Question

Gibson 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 $ 36.60 8.20 3.80 5.40 6.40 $128,000 47,000 Gibson planned to make and sell 32,000 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 31,000 and 33,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 33,000 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 32,000 Flexible Budgets 31,000 33,000 Number of units Variable manufacturing costs Fixed costs

Answer 1

Income Statement

Particulars		Master budget	Flexible budget	Actual budget	Volume variance [Difference of Master budget and actual budget]	Favorable or Unfavorable
Number of units		32000	31000	33000	1000	Favorable
Sales price	36.60	1171200	1134600	1207800	36600	Favorable
Less:Variable manufacturing costs
Material cost	8.20	(262400)	(254200)	(270600)	8200	Unfavorable
Labor cost	3.80	(121600)	(117800)	(125400)	3800	Unfavorable
Overhead cost	5.40	(172800)	(167400)	(178200)	5400	Unfavorable
Selling, General and administrative costs	6.40	(204800)	(198400)	(211200)	6400	Unfavorable
Contribution margin		409600	396800	422400	12800	Favorable
Less: Planned fixed cost
Manufacturing overhead		(128000)	(128000)	(128000)	-	none
Selling,general and administrative costs		(47000)	(47000)	(47000)	-	none
Net Income		234600	221800	247400	12800	Favorable

---------------*---------------

DO VOTE, ALL THE BEST