U2301 Chapter 8 Class Problems Key
1. Erick Manufacturing Company established the following standard price and cost information:
Erick expected to produce and sell 10,000 units. Actual production and sales amounted to 9,500 units.
Required:
(a) Prepare the pro forma income statement in contribution format that would appear in Erick’s master
budget for the year.
(b) Prepare the pro forma income statement in contribution format that would appear in Erick’s *exible
budget. (a)
(b)
2. Bane Accounting Services planned to charge its customers $120 per hour in 2009. The chief operating
o1cer expected that the company would provide 40,000 hours of service to clients. However, the vice
president for marketing argues that the actual number of hours may range from 36,000 to 44,000 hours.
Bane’s standard variable cost is $65 per hour, and its standard fixed cost is $1,500,000.
Required: Prepare *exible budgets for 36,000, 40,000, and 44,000 hours.
3. The Oberlin Company has requested a performance report that reports both sales activity variances
and *exible budget variances. The following table of information is provided:
Required:
1) Compute and enter variances in columns 3 and 6. In column 3, enter the variance (di9erence)
between column 2 and column 5; in column 4, label the variance as favorable (F) or unfavorable (U). In
column 6, enter the variance between columns 5 and 8, and in column 7 indicate whether this variance
is favorable or unfavorable.
2) Which column contains sales volume variances and which column contains *exible budget variances?
