Problem 15-21 Determining and interpreting flexible budget variances LO 15-5 Nar
ID: 2513747 • Letter: P
Question
Problem 15-21 Determining and interpreting flexible budget variances LO 15-5 Narcisco Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs 90.00 18.00 9.00 12.60 Labor cost Overhead cost es Manufacturing overhead Sell $270,000 108,000 Assume that Narcisco actually produced and sold 32.000 books. The actual sales price and costs incurred follow. $ 87.00 18.40 8.80 12.70 14.00 Sales price Labor cost Overhead cost Selling, .general, and admínistrative costs Actual fixed costs Manufacturing overhead sellinq, general, and administrative $250,000 116,000 K Prev 2 of 2Explanation / Answer
Ans. Particulars Flexible budget Variances Sales revenue 96000 U Variable manufacturing costs: Materials 12800 U Labor 6400 F Overhead 3200 U Selling, general and administrative costs 12800 F Contribution margin 92800 F Fixed costs: Manufacturing overhead 20000 F Selling, general and administrative costs 8000 U Net income 80800 U *Calculation: Ans. Flexible budget Actual results Sales revenue (90 * 32000) 2880000 Sales revenue (87 * 32000) 2784000 Variable manufacturing costs: Variable manufacturing costs: Materials (18*32000) 576000 Materials (18.40*32000) 588800 Labor (9*32000) 288000 Labor (8.80*32000) 281600 Overhead (12.60*32000) 403200 Overhead (12.70*32000) 406400 Selling, general and administrative costs (14.40*32000) 460800 Selling, general and administrative costs (14*32000) 448000 Contribution margin (sales - total variable costs) 1152000 Contribution margin (sales - total variable costs) 1059200 Fixed costs: Fixed costs: Manufacturing overhead 270000 Manufacturing overhead 250000 Selling, general and administrative costs 108000 Selling, general and administrative costs 116000 Net income (Contribution - total fixed cost) 774000 Net income(Contribution - total fixed cost) 693200 *Flexible budget variance = Flexible budget - Actual results *Increase in Sales, Contribution margin & Operating income = Favourable *Decrease in Sales, Contribution margin & Operating income = Unfavourable *Increase in Variable cost and fixed costs = Unfavourable *Decrease in Variable cost and fixed costs = Favourable