Question

Fisk Company uses a standard cost accounting system. During January, the company reported the following manufacturing variances.

Materials price variance		$1,220	U		Labor quantity variance		$870	U
Materials quantity variance		740	F		Overhead variance		840	U
Labor price variance		510	U

In addition, 9,000 units of product were sold at $9 per unit. Each unit sold had a standard cost of $5. Selling and administrative expenses were $7,060 for the month.

Prepare an income statement for management for the month ended January 31, 2020.

Answer 1

Computation of extra cost incurred due to variances:

Material Price Variance	$1,220
Materials quantity variance*	-$740
Labor price variance	$510
Labor quantity variance	$870
F Overhead variance	$840
Total Extra Costs incurred	$2,700

* Material Quantity variance is favorable, thats why taken as negative.

Fisk Company
Income Statement for January
Revenues	A	$81,000
(9,000 units* $9)
Expenses:
COGS (Standard Cost)	B	$45,000
(9,000 units* $5)
Extra Costs incurred due to variances	C	$2,700
Selling and administrative expenses	D	$7,060
Total Expenses	E=B+C+D	$54,760
Net Income	F=A-E	$26,240