Question

Solomon Publications established the following standard price and costs for a hardcover picture book that the...

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

Standard price and variable costs
Sales price $ 36.80
Materials cost 8.50
Labor cost 3.70
Overhead cost 6.20
Selling, general, and administrative costs 6.80
Planned fixed costs
Manufacturing overhead $ 130,000
Selling, general, and administrative 47,000

Assume that Solomon actually produced and sold 37,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price $ 35.80
Materials cost 8.70
Labor cost 3.60
Overhead cost 6.25
Selling, general, and administrative costs 6.60
Actual fixed costs
Manufacturing overhead $ 115,000
Selling, general, and administrative 53,000

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).)

Variances
Sales revenue not attempted not attempted
Variable manufacturing costs
Materials not attempted not attempted
Labor not attempted not attempted
Overhead not attempted not attempted
Selling, general,and administrative costs not attempted not attempted
Contribution margin not attempted not attempted
Fixed costs
Manufacturing overhead not attempted not attempted
Selling, general, and administrative costs not attempted not attempted
Net income not attempted

Homework Answers

Answer #1

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).)

Variances
Sales revenue (36.80-35.80)*37000 = 37000 Unfavorable
Variable manufacturing costs
Materials (37000*.20) = 7400 Unfavorable
Labor 3700 Favorable
Overhead (37000*.05) = 1850 Unfavorable
Selling, general,and administrative costs (37000*.20) = 7400 Favorable
Contribution margin 35150 Unfavorable
Fixed costs
Manufacturing overhead 15000 Favorable
Selling, general, and administrative costs 6000 Unfavorable
Net income 26150 Unfavorable
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