Chapter 16 – Fundamentals of Variance Analysis
16–31
16–41. (continued)
(a) 1,500 units from actual column.
(b) $1,500 U = $40,500 – $39,000.
(c), (d) Budgeted sales price per unit = $40,500 ÷ 1,500 units = $27.
Chapter 16 – Fundamentals of Variance Analysis
16–32
16–42. (40 min.) Find Data for Profit Variance Analysis.
Actual
(based on
actual sales
volume)
Manufac-
turing
Variance
Marketing and
Administrative
Variance
Sales
Price
Variance
Flexible
Budget
(based
on actual
sales
volume)
Sales
Activity
Variance
Master
Budget
(based on
budgeted
sales
volume)
Units …………………………..…………………………..
a
6,000
b
1,000 F
5,000
Sales revenue ……………..……………
g
$2,250 F
$22,500
h
$3,750 F
i
$18,750
Less:
Variable
manufacturing costs …………………………..
n
$1,125 U
o
12,000
2,000 U
j
10,000
Variable marketing
and
administrative costs ..…………………………
$300 F
p
3,000
500 U
2,500
c
Contribution margin …………………………..
q
$1,125 U
$300 F
s
$2,250 F
x
$7,500
$1,250 F
k
$6,250
Less:
Fixed manufacturing
costs ……………………..……
r
250 F
3,125
m
3,125
d
Fixed marketing and
administrative costs …………………………..
375 U
v
1,875
1,875
e
Operating profits …………..………………
t
$875 U
u
$ 75 U
w
$2,250 F
$ 2,500
$1,250 F
l
$ 1,250
f
Chapter 16 – Fundamentals of Variance Analysis
16–33
16–42. (continued)
Computations:
a
.
6,000 units.
see b.
b
.
6,000 units.
5,000 units* + 1,000 F units.
c
.
$2,500
$18,750* – $10,000* – $6,250*.
d
.
$3,125
Same as m.
e
.
$1,875
Fixed costs in master budget are the same as the fixed costs in
the flexible budget.
f
.
$1,250
$6,250* – $3,125 (d) – $1,875 (e).
g
.
$24,750
$22,500 (h) + $2,250*.
h
.
$22,500
6,000 units (b) x ($18,750* ÷ 5,000 units*).
Alternative computation:
$12,000* + $3,000* + $7,500*.
i
.
$3,750 F
$22,500 (h) – $18,750*.
Alternative computation:
1,000 F units* x $3.75 selling price (= $18,750 ÷ 5,000 units).
j
.
$2,000 U
$12,000* – $10,000*.
k
.
$1,250 F
$7,500* – $6,250*.
Alternative computation:
$3,750 F (i) – $2,000 U (j) – $500 U*.
l
.
$1,250 F
Same as k.
m
.
$3,125
$7,500* – $1,875* – $2,500*.
n
.
$13,125
$12,000* + $1,125 (o).
o
.
$1,125 U
Total manufacturing variance on the contribution margin line.
p
.
$300 F
$3,000* – $2,700*.
q
.
$8,925
$24,750 (g) – $13,125 (n) – $2,700*.
r
$2,875
$3,125 (m) – $250 F*.
Chapter 16 – Fundamentals of Variance Analysis
16–34
.
s
.
$300 F
Same as p.
t
.
$3,800
$8,925 (q) – $2,875 (r) – $2,250*.
u
.
$875 U
$1,125 U* – $250 F*.
v
.
$375 U
$2,250* – $1,875*.
w
.
$75 U
$300 F (s) – $375 U (v).
x
.
$2,250 F
Sales price variance.
*Given
16–43. (20 min.) Ethical Issues In Managing Reported Profits: Doak Industries.
Ray is trying to improve the profit on next year’s income statement. He knows that a
revised budget to reflect changes in product lines might make it harder to get a bonus next
Chapter 16 – Fundamentals of Variance Analysis
16–35
16–44. (20 min.) Prepare Flexible Budget: Tolstoy Corporation.
Flexible
Budgeta
Calculations
Sales revenue …………………………..
$54,0
00
$60,0
00
x
(360 ÷ 400)
Variable costs:
Manufacturing costs
Direct labor …………………..………
8,100
9,000
x
(360 ÷ 400)
Materials …………………………..
7,560
8,400
x
(360 ÷ 400)
Variable overhead …………………………..
5,400
6,000
x
(360 ÷ 400)
Marketing …………………………..
3,240
3,600
x
(360 ÷ 400)
Administrative …………………………..
2,700
3,000
x
(360 ÷ 400)
Total variable costs …………….…………….
$27,0
00
Contribution margin …………….…………….
$27,0
00
Less fixed costs: ……………….………….
Manufacturing ……………….………….
3,000
Marketing …………………….…….
6,000
Administrative ……………….………….
6,000
Total fixed costs …………………………..
$15,0
00
Operating profit ………………….……….
$12,0
00
a Sales revenue and the variable costs are 90 percent (360 units 400 units x 100%) of
the master budget amounts.
Chapter 16 – Fundamentals of Variance Analysis
16–36
16–45. (20 min.) Sales Activity Variance: Tolstoy Corporation.
Flexible
Budget
(based on
actual of
360 units)
Sales Activity
Variance
Master Budget
(based on
budgeted 400
units)
Sales revenue ……………………..……
$54,000
$6,000
U
$60,000
Less variable costs:
Manufacturing costs:
Direct labor …………………..………
8,100
900
F
9,000
Materials …………………………..
7,560
840
F
8,400
Variable overhead …………………………..
5,400
600
F
6,000
Marketing ………………………..…
3,240
360
F
3,600
Administrative…………………..………
2,700
300
F
3,000
Total variable costs …………………………..
$27,000
$ 3,000
F
$30,000
Contribution margin ……………..……………
$27,000
$ 3,000
U
$30,000
Less fixed costs:
Manufacturing ……………….………….
3,000
-0-
3,000
Marketing ……………………..……
6,000
-0-
6,000
Administrative ……………….………….
6,000
-0-
6,000
Total fixed costs …………………..………
$15,000
-0-
$15,000
Operating profits ………………….……….
$12,000
$3,000
U
$15,000
Chapter 16 – Fundamentals of Variance Analysis
16–37
16–46. (30 min.) Profit Variance Analysis: Tolstoy Corporation.
Actual
(360 Units)
Manu-
facturing
Variance
Marketing &
Administrative
Variance
Sales Price
Variance
Flexible
Budget
(360 Units)
Sales
Activity
Variance
Master
Budget
(400 Units)
Sales revenue ………………..…………
$55,200
$1,200
F
$54,000
$6,000
U
$60,000
Variable costs:
Manufacturing
Direct labor …………………………..
8,520
$420
U
8,100
900
F
9,000
Materials …………………………..
7,200
360
F
7,560
840
F
8,400
Overhead ………………..…………
4,920
480
F
5,400
600
F
6,000
Marketing …………………………..
3,180
$60
F
3,240
360
F
3,600
Administrative ……………..……………
3,000
300
U
2,700
300
F
3,000
Contribution margin …………………………..
$28,380
$420
F
$240
U
$1,200
F
$27,000
$3,000
U
$30,000
Fixed costs:
Manufacturing ……………..……………
2,916
84
F
3,000
—
3,000
Marketing …………………………..
6,240
240
U
6,000
—
6,000
Administrative ……………..……………
5,976
24
F
6,000
—
6,000
Operating profit …………………………..
$13,248
$504
F
$456
U
$1,200
F
$12,000
$3,000
U
$15,000
Chapter 16 – Fundamentals of Variance Analysis
16–38
16–47. (20 min.) Prepare Flexible Budget: Hayden Corporation.
Flexible Budgeta
Calculations
Sales revenue …………………………..
$630,000
$600,000
x
(21,000 ÷ 20,000)
Variable costs:
Manufacturing costs
Direct labor …………………..………
63,000
60,000
x
(21,000 ÷ 20,000)
Materials ……………………..……
84,000
80,000
x
(21,000 ÷ 20,000)
Variable overhead …………………………..
84,000
80,000
x
(21,000 ÷ 20,000)
Marketing …………………………..
26,250
25,000
x
(21,000 ÷ 20,000)
Administration ………………..…………
26,250
25,000
x
(21,000 ÷ 20,000)
Total variable costs …………….…………….
$283,500
Contribution margin …………………………..
$346,500
Less fixed costs: ……………….………….
Manufacturing …………………………..
125,000
Marketing …………………….…….
25,000
Administration ……………….………….
100,000
Total fixed costs …………………………..
$250,000
Operating profit ………………….……….
$96,500
a Sales revenue and the variable costs are 105 percent (21,000 units 20,000 units x
100%) of the master budget amounts.
Chapter 16 – Fundamentals of Variance Analysis
16–39
16–48. (20 min.) Sales Activity Variance: Hayden Corporation.
Flexible
Budget
(based on
actual of
21,000 units)
Sales Activity
Variance
Master Budget
(based on
budgeted
20,000 units)
Sales revenue …………………….…….
$630,000
$30,000
F
$600,000
Less variable costs:
Manufacturing costs:
Direct labor …………………..………
63,000
3,000
U
60,000
Materials ……………………..……
84,000
4,000
U
80,000
Variable overhead …………………………..
84,000
4,000
U
80,000
Marketing ………………………..…
26,250
1,250
U
25,000
Administration ………………….……….
26,250
1,250
U
25,000
Total variable costs ……………..……………
$283,500
$13,500
U
$270,000
Contribution margin ……………..……………
$346,500
$ 16,500
F
$330,000
Less fixed costs:
Manufacturing …………………………..
125,000
-0-
125,000
Marketing …………………….…….
25,000
-0-
25,000
Administration …………………………..
100,000
-0-
100,000
Total fixed costs ………………….……….
$250,000
-0-
$250,000
Operating profits ………………….……….
$96,500
$16,500
F
$80,000
Chapter 16 – Fundamentals of Variance Analysis
16–40
16–49. (30 min.) Profit variance analysis: Hayden Corporation.
Actual
(21,000 Units)
Manu-
facturing
Variance
Marketing &
Administration
Variance
Sales Price
Variance
Flexible
Budget
(21,000
Units)
Sales
Activity
Variance
Master
Budget
(20,000
Units)
Sales revenue ………….……………….
$577,500
$52,500
U
$630,000
$30,000
F
$600,000
Variable costs:
Manufacturing
Direct labor ………..…………………
73,500
$10,500
U
63,000
3,000
U
60,000
Materials …………..………………
68,250
15,750
F
84,000
4,000
U
80,000
Overhead ………….……………….
79,250
4,750
F
84,000
4,000
U
80,000
Marketing ……………..……………
25,500
$750
F
26,250
1,250
U
25,000
Administration ……….………………….
23,500
2,750
F
26,250
1,250
U
25,000
Contribution margin …..………………………
$307,500
$10,000
F
$3,500
F
$52,500
U
$346,500
$16,500
F
$330,000
Fixed costs:
Manufacturing ……….………………….
128,000
3,000
U
125,000
—
125,000
Marketing ……………..……………
28,500
3,500
U
25,000
—
25,000
Administration ……….………………….
101,500
1,500
U
100,000
—
100,000
Operating profit ………..…………………
$49,500
$7,000
F
$1,500
U
$52,500
U
$96,500
$16,500
F
$80,000