Question

Perez Manufacturing Company established the following standard price and cost data: Sales price $ 8.30 per unit Variable manufacturing cost $ 4.00 per unit Fixed manufacturing cost $ 2,500 total Fixed selling and administrative cost $ 600 total Perez planned to produce and sell 2,200 units. Actual production and sales amounted to 2,300 units.

Assume that the actual sales price is $7.95 per unit and that the actual variable cost is $4.15 per unit. The actual fixed manufacturing cost is $1,900, and the actual selling and administrative costs are $635. Required a.&b. Determine the flexible budget variances and classify 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

Required a.&b. Determine the flexible budget variances and classify 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	Actual	Flexible budget variance
Sales	2300*8.30 = 19090	2300*7.95 = 18285	805 U
Less: Cost of goods sold
Variable manufacturing cost	2300*4 = 9200	2300*4.15 = 9545	345 U
Fixed manufacturing cost	2500	1900	600 F
Gross profit	7390	6840	550 U
Selling and administrative expense	600	635	35 U
Net operating income	6790	6205	585 U