Question

ABC Inc. Has the flexible budgeted income statement for the period ended in December 31, 2019...

ABC Inc. Has the flexible budgeted income statement for the period ended in December 31, 2019 at 600 units sold as follows:

      Sales (100 price per unit   *600 units)     600,000

  • Cost of gold sold (600*50)            300,0000
  • Gross profit                                    300,000
  • Operating expenses:
  • Wages and salaries (10,000+ 10*600) 16,000
  • Supplies (5000+2*600)                       6,200
  • Insurance                                            3,000
  • Total expenses                                   25,200
  • Net operating income                        274,800

Whereas the actual income statement for the period ended in December 31, 2019 at 600 units sold as follows:

Sales                                                     650,000

  • Cost of gold sold                        300,000
  • Gross profit                               350,000
  • Operating expenses:
  • Wages and salaries                    20,000
  • Supplies)                                   7,000
  • Insurance                                   3,000
  • Total expenses                           30,000
  • Net operating income              320,000

Required: compute the variance and specify whichever favorable and unfavorable variance is.

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