Question

Solomon 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 $ 36.90 8.40 4.50 6.10 7.20 Planned fixed costs Manufacturing overhead Selling, general, and administrative $135,000 45,000 Assume that Solomon actually produced and sold 29,000 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 $ 35.90 8.60 4.40 6.15 7.00 Actual fixed costs Manufacturing overhead Selling, general, and administrative $120,000 51,000 Requirec a. & b. Determine the flexible budget varlances and also Indicate the effect of each varlance by selecting favorable (F) or unfavorable (U). (Select "None" If there is no effect (l.e., zero variance).) ible Variances Sales revenue Variable manufacturing costs Materials Labor Selling, general,and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general, and administrative costs Net income

Answer 1

	Units	29000				WN:
						Actual Costs:
1	Flexible Budget:	PU	Amount			Flexible Budget:	PU	Amount
	Sales Revenue	36.90	1070100			Sales Revenue	35.90	1041100
	Variable Costs:					Variable Costs:
	Material Cost	8.40	243600			Material Cost	8.60	249400
	Labor Cost	4.50	130500			Labor Cost	4.40	127600
	Overhead Cost	6.10	176900			Overhead Cost	6.15	178350
	Selling, Admin Exp	7.20	208800			Selling, Admin Exp	7.00	203000
	Total Variable Costs(A)	26.20	759800			Total Variable Costs(A)	26.15	758350
	Fixed Costs:					Fixed Costs:
	Manufacturing OH		135000			Manufacturing OH		120000
	Selling, Admin Exp		45000			Selling, Admin Exp		51000
	Total Fixed Costs(B)		180000			Total Fixed Costs(B)		171000
	Total Costs(A+B)		939800			Total Costs(A+B)		929350
	Budgeted Income		130300			Budgeted Income		111750
2	Variances:	Flexible	Actual	Variance	U/F
	Sales Revenue	1070100	1041100	29000	U
	Variable Costs:
	Material Cost	243600	249400	-5800	U
	Labor Cost	130500	127600	2900	F
	Overhead Cost	176900	178350	-1450	U
	Selling, Admin Exp	208800	203000	5800	F
	Contribution Margin	310300	282750	27550	F
	Fixed Costs:
	Manufacturing OH	135000	120000	15000	F
	Selling, Admin Exp	45000	51000	-6000	U
	Net Income	130300	111750	18550	F