Preparing a performance report Strand Manufacturing, Inc., has the following fle
ID: 2471146 • Letter: P
Question
Preparing a performance report Strand Manufacturing, Inc., has the following flexible budget formulas and amounts: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25 per unit Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 per unit Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 per unit Variable factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 per unit Variable selling and administrative expense . . . . . . . . . . . . . . 1 per unit Fixed factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 per month Fixed selling and administrative expense . . . . . . . . . . . . . . . . . $20,000 per month Actual results for the month of May for the production and sale of 5,000 units were as follows: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,000 Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 Variable factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,500 Variable selling and admin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500 Fixed factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,750 Fixed selling and admin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,800 Prepare a performance report for the month of May that includes the identification of the favorable and unfavorable variances. LO3 LO3
Explanation / Answer
Solution:
Performance report for the month of May:
"F" indicates Favorable Variance &
"U" indicates Unfavorable Variance
Budget 5,000 Units Actual 5,000 Units Variance Sales 125,000 120,000 5,000 U Less: Variable Costs Direct Materials 25,000 26,000 1,000 U Direct Labor 15,000 14,000 1,000 F Variable Factory Overhead 20,000 25,500 5,500 U Variable Selling & Admin Expense 5,000 5,500 500 U Contribution Margin 60,000 49,000 11,000 U Less: Fixed Costs Fixed Factory Overhead 25,000 26,750 1,750 U Fixed Selling and Admin Expenses 20,000 19,800 200 F Operating Income 15,000 2,450 12,550 U