Question

Edison Electronics produces wireless headphones. Management planned to make and sell 9,000 sets of headphones during...

Edison Electronics produces wireless headphones. Management planned to make and sell 9,000 sets of headphones during the year and determined the standard price and cost data to be as follows:

Standard price and variable costs

Sales

$130.00 per unit

Raw Materials

$32.20 per unit

Direct Labor

$40.50 per unit

Overhead

$18.70 per unit

Planned fixed costs

Manufacturing overhead

$97,000

Selling, general and administrative costs

$135,000

Edison Electronics actually produced and sold 9,700 sets of headphones for the year. Actual sales and costs for the year were as follows:

Sales

$1,240,300

Variable costs

Raw Materials

$325,600

Direct Labor

$400,500

Overhead

$176,400

Fixed costs

Manufacturing overhead

$100,500

Selling, general and administrative costs

$131,800

Required:

  1. Prepare the static budgeted income statement showing the sales and each cost line as a separate line item in the income statement (note—amounts in the budgeted income statement should be the extended amounts and not the per unit prices and costs).  

  2. Compare the actual income statement amounts with the amounts in the budgeted income statement and determine the amount of each variance and indicate whether each variance is favorable or unfavorable.

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