Question

Calc+ Company manufactures calculators for schools. The master budget is based on sales of 40,000 units at $65 per calculator. Budgeted variable costs are $45 per unit, while budgeted fixed costs total $670,000. Actual income was $211,000 on actual sales of 42,000 units at $64 each. Actual variable costs were $43 per unit and actual fixed costs totaled $671,000. What is the master-budget variance of operating income (list variance amount and if it is favorable or unfavorable)?

Calc+ Company manufactures calculators for schools. The master budget is based on sales of 40,000 units at $65 per calculator. Budgeted variable costs are $45 per unit, while budgeted fixed costs total $670,000. Actual income was $211,000 on actual sales of 42,000 units at $64 each. Actual variable costs were $43 per unit and actual fixed costs totaled $671,000. The flexible budget will report ________ for operating income.

Calc+ Company manufactures calculators for schools. The master budget is based on sales of 40,000 units at $65 per calculator. Budgeted variable costs are $45 per unit, while budgeted fixed costs total $670,000. Actual income was $211,000 on actual sales of 42,000 units at $64 each. Actual variable costs were $43 per unit and actual fixed costs totaled $671,000. What is the spending variance of sales (list variance amount and if it is favorable or unfavorable)?

Calc+ Company manufactures calculators for schools. The master budget is based on sales of 40,000 units at $65 per calculator. Budgeted variable costs are $45 per unit, while budgeted fixed costs total $670,000. Actual income was $211,000 on actual sales of 42,000 units at $64 each. Actual variable costs were $43 per unit and actual fixed costs totaled $671,000. What is the volume variance of variable costs (list variance amount and if it is favorable or unfavorable)?

Answer 1

	Master budget variance of operating income:
				Master Budget	Actual
				Based on 40000 units	Based on 42000 units
	Sales			2600000	2688000
				(40000*65)	(42000*64)
	Less: Variable cost			1800000	1806000
				(40000*45)	(42000*43)
	Contribution margin			800000	882000
	Less: Fixed cost			670000	671000
	Operating income			130000	211000
	Actual operating income is more than the budgeted operating income.Hence, variance is favorable
	Master-budget variance of operating income=211000-130000=$81000 favorable
	Flexible budget is prepared based on actual units sold:
				Actual
				Based on 42000 units
	Sales			2730000
				(42000*65)
	Less: Variable cost			1890000
				(42000*45)
	Contribution margin			840000
	Less: Fixed cost			670000
	Operating income			170000
	The flexible budget will report $ 170000 for operating income.
	Spending variance of sales=Actual units sold*(Actual selling price-Budgeted selling price)
	If the answer is positive,variance is favorable.Otherwise unfavorable
	Spending variance of sales=42000*(64-65)=42000*(-1)=-42000=42000 unfavorable
	Volume variance of variable cost=Budgeted variable cost rate*(budgeted units-Actual units )
	If the answer is positive,variance is favorable.Otherwise unfavorable
	Volume variance of variable cost=45*(40000-42000)=45*(-2000)=-90000=$ 90000 unfavorable