Exercise 6-5 Crane manufactures aluminum canoes. In planning for the coming year
ID: 2511722 • Letter: E
Question
Exercise 6-5
Crane manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and 3,500 canoes. Canoes sell for $800 each. The standard variable cost information for a canoe is as follows.
Annual fixed overhead cost is expected to be:
Alexis King chose to prepare a static budget based on sales of 3,000 canoes. Actual sales were 3,100 canoes at a price of $850 each. The company incurred the following costs for the year:
Prepare a performance report for the year that shows the flexible budget and sales volume variances. (If operating income is negative, enter amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Contribution margin
Direct materials $ 300 Direct labor 150 Variable overhead Utilities 35 Indirect material 30 Indirect labor 60 Total $ 575Explanation / Answer
Actual Flexible budget Flexible Sales volume Static Results variance budget variance budget unit sales 3,100 3,100 3,000 Sales revenue 2635000 155000 F 2480000 80000 F 2400000 less:Variable expenses: Direct material 920,000 10,000 F 930000 30000 U 900000 Direct labor 440,000 25,000 F 465000 15000 U 450000 overhead 397,500 10,000 U 387500 12500 U 375000 total variable expenses 1,757,500 25,000 F 1782500 57500 U 1725000 contribution margin 877,500 180,000 F 697500 22500 F 675000 total fixed expenses 114,000 7,000 U 107,000 0 N 107,000 operating income 763,500 173,000 F 590,500 22,500 F 568,000