Problem 15-21 Determining and interpreting flexible budget variances LO 15-5 Llo

ID: 2494664 • Letter: P

Question

Problem 15-21 Determining and interpreting flexible budget variances LO 15-5 Lloyd Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs $ 45.00 9.00 4.50 6.30 7.20 Planned fixed costs Manufacturing overhead Selling, general, and administrative $135,000 54,000 Assume that Lloyd actually produced and sold 32,000 books. The actual sales price and costs incurred follow Act ual price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs $ 43.50 9.20 4.40 6.35 7.00 Actual fixed costs Manufacturing overhead Selling, general, and administrative $125,000 58,000

Explanation / Answer

Actual

Budgeted

Variance

Sales Revenue

1392000

(45*32000)1440000

Variable Manufacturing Costs

Material

294400

288000

6400UF

Labour

140800

144000

3200 F

Overhead

203200

201600

1660 UF

Variable selling, general and Admin costs

224000

230400

6400 UF

Contribution margin

529600

576000

Fixed Costs

Manufacturing overheads

125,000

135,000

S.G.A

5,8000

54,000

Net Income

4716000

387000

84600

Assumption Budget Units = Actual Units

Direct Material Cost Variance = Standard Quantity for actual units*standard price - (actual quantity * actual price= 32,000*

Direct Labour cost variance = (Std. hour allowed for actual output *Actual Units)- Actual hour for actual output

Overhead variance =Recovered overheads- Actual overhead

Variable S.G&A = Recovered Overheads – Actual Overhead