Question

Thornton Publications established the following standard price and costs for a hardcover picture book that the company produces.

Standard price and variable costs
Sales price	$	36.60
Materials cost		8.90
Labor cost		3.90
Overhead cost		5.40
Selling, general, and administrative costs		7.10
Planned fixed costs
Manufacturing overhead	$	131,000
Selling, general, and administrative		51,000

Assume that Thornton actually produced and sold 33,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price	$	35.60
Materials cost		9.10
Labor cost		3.80
Overhead cost		5.45
Selling, general, and administrative costs		6.90
Actual fixed costs
Manufacturing overhead	$	116,000
Selling, general, and administrative		57,000

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

	Actual	Flexible budget variance		Flexible budget
Production	33000			33000
Sales revenue	1174800	33000	U	1207800
Variable expense
Material	300300	6600	U	293700
Labor	125400	3300	F	128700
Overheads	179850	1650	U	178200
Selling , general and admin	227700	6600	F	234300
Contribution margin	341550	31350	U	372900
Fixed expense
Manufacturing overheads	116000	15000	F	131000
Selling , general and admin	57000	6000	U	51000
Net operating income	168550	22350	U	190900