Question

Exercise 16-29 Profit Variance Analysis (LO 16-4)

(PLEASE INCLUDE STEP BY STEP CALCULATIONS)

Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month

	Actual (based on actual orders for 464,000 units)						Master Budget (based on budgeted orders for 508,000 units)
Sales revenue		$	4,982,000					$	5,080,000
Less
Variable costs
Materials			1,510,000						1,524,000
Direct labor			290,000						355,600
Variable overhead			675,800						660,400
Variable marketing and administrative			496,000						508,000
Total variable costs		$	2,971,800					$	3,048,000
Contribution margin		$	2,010,200					$	2,032,000
Less
Fixed costs
Manufacturing overhead			991,600						961,400
Marketing			302,000						302,000
Administrative			218,000						181,400
Total fixed costs		$	1,511,600					$	1,444,800
Operating profits		$	498,600					$	587,200

Required:

Prepare a profit variance analysis for Osage, Inc., (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Exercise 16-29 Profit Variance Analysis (LO 16-4) Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month Actual (based onMaster Budget (based actual orders for on budgeted orders for 464,000 units) $4,982,000 508,000 units) $5.080.000 Sales revenue Less Variable costs 1,524,000 355,600 660,400 508,000 Materials Direct labor Variable overhead Variable marketing and administrative 1,510,000 290,000 675.800 496.000 Total variable costs Contribution margin Less Fixed costs 991,600 302,000 218,000 961,400 302,000 181.400 Manufacturing overhead Marketing Administrative Total fixed costs Operating profits S 498,600 S 587,200 Required Prepare a profit variance analysis for Osage, Inc., (Do not round intermediate calculations. Indicate the effect of each variance by selecting"F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) OSAGE, IN Profit Variance Analysis Marketing and Administrative Variances Manufacturing Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget Actual Sales revenue $ 4,982,000 S 5,080,000 Variable costs Materials Direct labor Variable overhead Variable marketing and administrative 1,510,000 290,000 675,800 496,000 $ 2,971,800 $ 2,010,200 1,524,000 355,600 660,400 508,000 S 3,048,000 S 2,032,000 Total variable costs Contribution margin Fixed costs Manufacturing overhead Marketing Administrative 991,600 302,000 218,000 $ 1,511,600 $ 498,600 961.400 302,000 181,400 S 1,444,800 S 587,200 Total fixed costs Operating profits

Answer 1

Osage Inc.
Profit variance Analysis
	Actual	Manufacturing Variances		Marketing and Administrative variances		Sales Price Variance		Flexible Budget	Sales Activity Variance		Master Budget
	(a)							(b) = [(c)/508000] X 464000			(c)
Number of Orders	4,64,000							4,64,000			5,08,000
Sales Revenue	$       49,82,000					$   3,42,000	F	$                46,40,000	$ 4,40,000	U	$       50,80,000
Less Variable Expenses:
Material	$       15,10,000	$   1,18,000	U					$                13,92,000	$ 1,32,000	F	$       15,24,000
Direct Labor	$          2,90,000	$      34,800	F					$                  3,24,800	$      30,800	F	$          3,55,600
Variable Overhead	$          6,75,800	$      72,600	U					$                  6,03,200	$      57,200	F	$          6,60,400
Variable Marketing and Administration	$          4,96,000			$ 32,000	U			$                  4,64,000	$      44,000	F	$          5,08,000
Total Variable Costs	$       29,71,800	$   1,55,800	U	$ 32,000	U			$                27,84,000	$ 2,64,000	F	$       30,48,000
Contribution margin	$       20,10,200	$   1,55,800	U	$ 32,000	U	$   3,42,000	F	$                18,56,000	$ 1,76,000	U	$       20,32,000
Less Fixed Expenses:
Manufacturing Overhead	$          9,91,600	$      30,200	U					$                  9,61,400	$               -	None	$          9,61,400
Marketing	$          3,02,000			$          -	N			$                  3,02,000	$               -	None	$          3,02,000
Administration	$          2,18,000			$ 36,600	U			$                  1,81,400	$               -	None	$          1,81,400
Total Fixed Costs	$       15,11,600	$      30,200	U	$ 36,600	U			$                14,44,800	$               -	None	$       14,44,800
Operating Profits	$          4,98,600	$   1,86,000	U	$ 68,600	U	$   3,42,000	F	$                  4,11,200	$ 1,76,000	U	$          5,87,200