Assume that in June Schmidt Machinery Company (Exhibit 14.1) manufactured and so
ID: 2485821 • Letter: A
Question
Assume that in June Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 1,020 units for $720 each. During this month the company incurred $520,200 total variable expenses and $180,100 total fixed expenses. Required for the Month of June:
1. Prepare a flexible budget for the production and sale of 1,020 units.
Compute for June:
The sales volume variance, in terms of contribution margin. is it favorable or unfavorable? (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Calculate for June: (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Required
Total flexible budget variance amount? favorable or unfavorable?
Total variable cost flexible budget variance amount? favorable or unfavorable?
Total fixed cost flexible budget variance amount? favorable or unfavorable?
The selling price variance amount? favorable or unfavorable?
2.Compute for June:
Explanation / Answer
1.
It is assumed that fixed costs will not change at 1020 units
2.
Sales volume variance = 3-1
= 816000 - 800000 = 16000 F
Sales volume contribution variance = 3-1
=357000-350000 = 7000F
All the variances required are shown in the table above. Since the budget is made according to 1020 units, the question of efficiency and volume variance is irrelevant.
Budget for 1020 units Units 1020 Sales 816000 (800000/1000) Variable Cost 459000 (450000/1000) Contribution 357000 (350000/1000) Fixed Cost 150000 (120000+30000) Operating Income 207000