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 | |
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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