Question

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

Standard price and variable costs
Sales price	$	36.20
Materials cost		8.70
Labor cost		4.00
Overhead cost		5.50
Selling, general, and administrative costs		7.10
Planned fixed costs
Manufacturing overhead	$	135,000
Selling, general, and administrative		52,000

Assume that Walton actually produced and sold 31,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price	$	35.20
Materials cost		8.90
Labor cost		3.90
Overhead cost		5.55
Selling, general, and administrative costs		6.90
Actual fixed costs
Manufacturing overhead	$	120,000
Selling, general, and administrative		58,000

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 budgets		Flexible
				budget	budget		budget variance
Number of units				31,000	31,000
Sales revenue				1091200	1122200		31000	U
Variable manufacturing costs
material cost				275900	269700		6200	U
labor cost				120900	124000		3100	F
overhead cost				172050	170500		1550	U
selling,general & administrative cost				213900	220100		6200	F
contribution margin				308450	337900		29450	U
fixed costs
manufacturing overhead				120,000	132000		12,000	F
selling,general & administrative cost				58,000	52,000		6,000	U
net operating income				130,450	153,900		23,450	F