Question

Narcisco Publications established the following standard price and costs for a hardcover picture book that the company produces. $ Standard price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Planned fixed costs Manufacturing overhead Selling, general, and administrative 90.00 18.00 9.00 12.60 14.40 $270,000 108,000 Assume that Narcisco actually produced and sold 32,000 books. The actual sales price and costs incurred follow. Actual price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Actual fixed costs Manufacturing overhead Selling, general, and administrative $ 87.00 18.40 8.80 12.70 14.00 $250,000 116,000 Required a. & b. Determine the flexible budget variances and also indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) Flexible Budget Variances Sales revenue

Answer 1

Flexible budget variance :

Sales revenue: Actual quantity [flexible budget price-Actual price ]

if the positive variance is unfavorable and if the negative variance is favorable

b)for cost ,Actual quantity [Actual price -flexible budget price]

if the positive variance is unfavorable and if the negative variance is favorable

	Calculation	Flexible budget variance	Variance
sales   AQ[FP-AP]	32000[90-87]	96000	U
variable manufacturing cost AQ[AP-FP]
Material	32000[18.4-18]	12800	U
Labor	32000[8.8-9]	-6400	F
overhead	32000[12.7-12.6]	3200	U
Selling, general, and administrative costs	32000[14-14.4]	-12800	F
contribution margin	96000+12800-6400+3200-12800	92800	U
Fixed cost
Manufacturing overhead	250000-270000	-20000	F
Selling, general, and administrative costs	116000-108000	8000	U
Net income	92800-20000+8000 [CONtribution-fixed cost]	80800	U

**flexible budget variance is a difference between actual and budgeted results at actual output.