Question

Use the tollowing data to arnswer tie folowing questions:to The president of the company, Gregory Peters, has come to you for help. Use the following data to answer the following questions: heip Actual Sales volume: Sales price: Variable costs: Budgeted 12,000 $24 per unit $22 per unit 10,000 $5 per unit $2 per unit $7 per unit $ 3 per unit 1 per unit Direct materials Direct Labor Variable overhead Variable Admin Exp Variable Selling $6 per unit $2 per unit $8 per unit $2 per unit $2 per unit Fixed costs: Manufacturing Overhead Admin Exp $50,000 $20,000 $60,000 $15,000 Required: Prepare contribution margin income statement for actual results, static budget and flexible budget and calculate flexible budget variance and sales volume variance.

Answer 1

answer 1.

contribution margin income statement

particular	amount	amount
sales 10000 *22		220000
variable cost	(200000)
material cost 6 * 10000	60000
labor cost   2* 10000	20000
variable overhead   8* 10000	80000
administration and selling exp 4 *10000	40000
contribution margin		20000
fixed overhead	60000
admin exp	15000

net loss

55000

contribution margin = 20000

answer 2.

sales volume variance

If absorption costing is using, Sales Volume Variance- (Actual Unit Sold - Budgeted Unit Sales) x Standard Profit Per Unit If marginal costing is using, Sales Volume Variance- (Actual Unit Sold - Budgeted Unit Sales) x Standard Contribution Per Unit

actual unit sold = 10000

budgeted unit sales = 12000

actual unit sold - budgeted unit = 2000

2000 * 24 =48000

sales volume variance = 48000 it is unfavorable

actual production < budgeted production so it is unfavorable

answer 3.

flexible budget variance

flexible budget = production * selling price

                      240000 =10000   *   24

actual =   production * selling price

   220000= 10000 * 22

variance is 20000 unfavorable

selling price flexible budget >actual budget so it is unfavorable