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	$	36.80
Materials cost		8.60
Labor cost		4.10
Overhead cost		5.90
Selling, general, and administrative costs		6.60
Planned fixed costs
Manufacturing overhead	$	129,000
Selling, general, and administrative		53,000

Assume that Finch actually produced and sold 22,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price	$	35.80
Materials cost		8.80
Labor cost		4.00
Overhead cost		5.95
Selling, general, and administrative costs		6.40
Actual fixed costs
Manufacturing overhead	$	114,000
Selling, general, and administrative		59,000

Required

a. & b. Determine the flexible budget variances and also indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Flexible Budget Variances Sales revenue Variable manufacturing costs Materials Labor Overhead Selling, general, and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general, and administrative costs Net income

Answer 1

	Flexible Budget Variances
Sales revenue	22000	U
Variable manufacturing costs
Materials	4400	U
Labor	2200	F
Overhead	1100	U
Selling, general, and administrative costs	4400	F
Contribution margin	20900	U
Fixed costs
Manufacturing overhead	15000	F
Selling, general, and administrative costs	6000	U
Net income	11900	U
Workings:
	Flexible budget	Actual	Flexible Budget Variances
Sales revenue	809600	787600	22000	U
Variable manufacturing costs
Materials	189200	193600	4400	U
Labor	90200	88000	2200	F
Overhead	129800	130900	1100	U
Selling, general, and administrative costs	145200	140800	4400	F
Contribution margin	255200	234300	20900	U
Fixed costs
Manufacturing overhead	129000	114000	15000	F
Selling, general, and administrative costs	53000	59000	6000	U
Net income	73200	61300	11900	U
Formulas:
	Flexible budget	Actual
Sales revenue	=22000*36.8	=22000*35.8
Variable manufacturing costs
Materials	=22000*8.6	=22000*8.8
Labor	=22000*4.1	=22000*4
Overhead	=22000*5.9	=22000*5.95
Selling, general, and administrative costs	=22000*6.6	=22000*6.4