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	$	90.00
Materials cost		18.00
Labor cost		9.00
Overhead cost		12.60
Selling, general, and administrative costs		14.40
Planned fixed costs
Manufacturing overhead	$	270,000
Selling, general, and administrative		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	$	87.00
Materials cost		18.40
Labor cost		8.80
Overhead cost		12.70
Selling, general, and administrative costs		14.00
Actual fixed costs
Manufacturing overhead	$	250,000
Selling, general, and administrative		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).)

Answer 1

Determination of flexible budget variance

	Actual budget	Flexible budget	Variances
Sales revenue	$2,784,000	$2,880,000	$96,000 (U)
Less: Variable manufacturing costs
Material costs	$588,800	$576,000	$12,800(U)
Labor costs	$281,600	$288,000	$6,400(F)
Overhead cost	$406,400	$403,200	$3,200(U)
Selling , general and administrative costs	$448,000	$460,800	$12,800(F)
Contribution margin	$1,059,200	$1,152,000	$92,800(U)
Fixed costs:
Manufacturing overhead	$250,000	$270,000	$20,000(F)
Selling, general and administrative costs	$116,000	$108,000	$8,000(U)
Net operating income	$693,200	$774,000	$80,800(U)

Units sold =32,000 units

_____×_____

All the best