Question

Problem 15-21 Determining and interpreting flexible budget variances LO 15-5 Rundle Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price $ 36.90 Materials cost 8.70 Labor cost 4.40 Overhead cost 5.80 Selling, general, and administrative costs 6.90 Planned fixed costs Manufacturing overhead $ 128,000 Selling, general, and administrative 52,000 Assume that Rundle actually produced and sold 35,000 books. The actual sales price and costs incurred follow: Actual price and variable costs Sales price $ 35.90 Materials cost 8.90 Labor cost 4.30 Overhead cost 5.85 Selling, general, and administrative costs 6.70 Actual fixed costs Manufacturing overhead $ 113,000 Selling, general, and administrative 58,000 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

Solution:

Rundle Publications
Flexible Budget Variance
Particulars	Actual results	Flexible Budget Variance		Flexible Budget
Unit Sales	35000			35000
Sales Revenue	$1,256,500.00	$35,000.00	U	$1,291,500.00
Less: Variable Expenses:
Direct material	$311,500.00	$7,000.00	U	$304,500.00
Direct labor	$150,500.00	$3,500.00	F	$154,000.00
Variable overhead	$204,750.00	$1,750.00	U	$203,000.00
Selling , general and administrative cost	$234,500.00	$7,000.00	F	$241,500.00
Total variable expenses	$901,250.00	$1,750.00	F	$903,000.00
Contribution margin	$355,250.00	$33,250.00	U	$388,500.00
Less: Fixed expenses:
Manufacturing overhead	$113,000.00	$15,000.00	F	$128,000.00
Selling, general and administrative	$58,000.00	$6,000.00	U	$52,000.00
Total fixed expenses	$171,000.00	$9,000.00	F	$180,000.00
Operating Income	$184,250.00	$24,250.00	U	$208,500.00