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In September, Larson Inc. sold 40,000 units of its only product for $262,000, and incurred a...

In September, Larson Inc. sold 40,000 units of its only product for $262,000, and incurred a total cost of $245,000, of which $27,000 was fixed costs. The flexible budget for September showed total sales of $320,000. Among variances for the period were: total variable cost flexible-budget variance, $6,000U; total flexible-budget variance, $67,000U; and, sales volume variance, in terms of contribution margin, $29,000U.

The master budget operating income for September, to the nearest dollar, was:

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Answer #1

Flexible-budget sales = $320,000 (given)

Total variable cost flexible-budget Variance = Actual total variable costs -flexible-budget variable costs

Actual variable costs = ($245,000 - $27,000) = $218,000.

Flexible-budget variable costs = $218,000 -$6,000U variance = $212,000

flexible-budget contribution margin= 320,000 -212,000 =108,000

Total flexible-budget variance = actual operating income -flexible-budget operating income.

Actual operating income = actual sales revenue -actual costs

=262000-245,000= $17,000

Therefore, Budget operating income = 17,000+ 67,000 =$84,000

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