Homework Answers
Solution:
Static Budget
|
Static Budget |
Actual Results |
Static Budget Variances |
|
|
Unit Sold |
400 |
380 |
20 Unfavourable |
|
Revenue (Unit Sold X Selling Price per unit) |
$ 4500 |
$ 4487.8 |
$ 12.2 Unfavourable |
|
Variable cost |
|||
|
Direct Material |
$700(1) |
$ 798 |
$ 98 Unfavourable |
|
Direct Labour |
$ 800(2) |
$ 912 |
$ 112 Unfavourable |
|
Total Variable cost |
$1500 |
$ 1710 |
$ 210 Unfavourable |
|
Contribution Margin (Revenue – Variable cost) |
$ 3000 |
$ 2777.8 |
$ 222.2 Unfavourable |
|
Fixed cost |
$ 6000 |
$ 5700 |
$ 300 Unfavourable |
|
Operating Loss (Contribution – Fixed cost) |
($ 3000) |
($ 2922.2) |
$ 77.8 Unfavourable |
(1) Direct Material for 400 curtains= 3.5 X 400 X $ 0.50 = $ 700
(2) Direct Labour for 400 curtains= 0.5 X 400 X $ 4 = $ 800
Flexible Budget and Sales Volume Variances
|
Static Budget |
Actual Results |
Flexible Budget |
Sales volume variance (i.e. Flexible budget –Static budget) |
|
|
Unit Sold |
400 |
380 |
380 |
380 |
|
Revenue (Unit Sold X Selling Price per unit) |
$ 4500 |
$ 4487.8 |
$ 4275(1) |
$ 225 Favourable |
|
Variable cost |
||||
|
Direct Material |
$700(1) |
$ 798 |
$ 665(2) |
$ 35 Favourable |
|
Direct Labour |
$ 800(2) |
$ 912 |
$ 760 (3) |
$ 40 Favourable |
|
Total Variable cost |
$1500 |
$ 1710 |
$ 1425 |
$ 75 Favourable |
|
Contribution Margin (Revenue – Variable cost) |
$ 3000 |
$ 2777.8 |
$ 2850 |
$ 150 Unfavourable |
|
Fixed cost |
$ 6000 |
$ 5700 |
$ 6000 |
0 |
|
Operating Loss (Contribution – Fixed cost) |
($ 3000) |
($ 2922.2) |
($ 3150) |
$ 6150 Unfavourable |
(1)380 curtains X $ 11.25 = $ 4275
(2)Budgeted Direct material for 380 units = 380 X 3.5 X $ 0.50 = $ 665
(3) Budgeted Direct labour for 380 units = 380 X 0.5 X $ 4 = $ 760
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