Question

Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:

	Actual (based on actual orders for 450,000 units)						Master Budget (based on budgeted orders for 480,000 units)
Sales revenue		$	4,970,000					$	4,800,000
Less
Variable costs
Materials			1,536,000						1,536,000
Direct labor			226,000						288,000
Variable overhead			627,900						576,000
Variable marketing and administrative			444,000						456,000
Total variable costs		$	2,833,900					$	2,856,000
Contribution margin		$	2,136,100					$	1,944,000
Less
Fixed costs
Manufacturing overhead			678,800						650,000
Marketing			175,000						175,000
Administrative			136,000						115,000
Total fixed costs		$	989,800					$	940,000
Operating profits		$	1,146,300					$	1,004,000

Required:

Prepare a sales activity variance analysis for Osage, Inc., (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Osage Inc

Sales Activity Variance

Flexible Budget Sales Activity Variance Master Budget

Sales Revenue

Variable Costs:

Materials

Direct Labor

Variable Overhead

Variable Marketing and Administrative

Total Variable Costs=

Contribution Margin=

Fixed Costs:

Manufacturing Overhead

Marketing

Administrative

Total Fixed Costs=

Operating Profits=

Answer 1

	Flexible Budget	Sales Activity Variance		Master Budget
Sales Revenue	4500000	300000	U	4800000
Variable Costs:
Materials	1440000	96000	F	1536000
Direct Labor	270000	18000	F	288000
Variable Overhead	540000	36000	F	576000
Variable Marketing and Administrative	427500	28500	F	456000
Total Variable Costs	2677500	178500	F	2856000
Contribution Margin	1822500	121500	U	1944000
Fixed Costs:
Manufacturing Overhead	650000	0	None	650000
Marketing	175000	0	None	175000
Administrative	115000	0	None	115000
Total Fixed Costs	940000	0	None	940000
Operating Profits	882500	121500	U	1004000