Question

Exercise 6-5 Sunland manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and 3,500 canoes. Canoes sell for $806 each. The standard variable cost information for a canoe is as follows. Direct materials Direct labor Variable overhead $304 198 Utilities 35 Indirect material 30 Indirect labor 60 Total $627 Annual fixed overhead cost is expected to be: Maintenance $ 18,260 Depreciation 38,700 Insurance 26,600 Rent 29,980 Total $113,540

Answer 1

Hi,

Please note:

F denotes Favourable Variance;

U denotes Unfavorable Variance

Solution: Actual Sales = 3100 canoes Actual Result flexible Budget Units ] 3100 3100 1 Units sales $856 8806 Variance 50() 1,55,000 (F) Sales Revenue 8 2653,600 $ 24,98,600 loss! Vo riable Expi Direct material 1 9,23,000 | 9,42,400 19,400 (F) Direct labour 5,85,900 | 6,13, 800 27,950 (6) | Overhead 3,99.500 | 3,87,500 1 - 12000 (U) | 35,300 (F) | Total variable 119,08,400 119,43,700 expenses Contribution sorgint 7,45,200 | 5,54,900 / 190,350 (6) Total fired Exp. 1,21,5601, 13,540 - 8000 (0) Opero ting Income 35,23,660 34,41,360 1,82,300 (F) canned with am Scanner

Units 1 Units sales Flexible Budget Sales Volume Varianced 3100 3600 | $806 Not Applicable Stutic Budget 3000 $806 | Sales Revenue $ 24,98,600 80,600 (F) $ 24,18,000 less: Variable Exp Direct Material 19,42,400 | 30,000 (UT 9,12,000 Direct lebour Overhead | 6, 13,800 3,87,500 19,800 (4 594,000 12,500 (0) 375,000 Total variable 19,43,700 | 62,700 (0) 18,81,000 Expenses || contributin mogin|554,900 | 17,900 (F) | 5,37 000 Toral fired Exp. 1, 13,560 Not Applicable 1, 13,540 Castag Sonne s 41340 19000 () $4,25,460 Operotire Income $ 4,41,360 os Scanned with -Earrscanner 17900 (F) 1 g 4.23 460