Problem 16-55 Profit Variance Analysis (LO 16-4) The results for July for Brahms
ID: 2523078 • Letter: P
Question
Problem 16-55 Profit Variance Analysis (LO 16-4) The results for July for Brahms & Sons follow: Actual (based on actual sales of 62,000 units) Master Budget (based on budgeted sales 60,000 units) Sales revenue $ 490,000 $ 510,000 Less Variable costs Direct material 62,000 51,000 Direct labor 80,000 90,000 Variable overhead 87,000 90,000 Marketing 15,000 15,000 Administrative 14,000 15,000 Total variable costs $ 258,000 $ 261,000 Contribution margin $ 232,000 $ 249,000 Less Fixed costs Manufacturing 104,000 102,000 Marketing 23,000 15,000 Administrative 82,300 81,000 Total fixed costs $ 209,300 $ 198,000 Operating profits $ 22,700 $ 51,000 Required: Prepare a profit variance analysis for Brahms & Sons. ( Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Explanation / Answer
Brahms & Sons Actual Budget Flexible Budget (Actual Units) Units sold 62000 60000 Sales Revenue $ 490,000.00 $ 510,000.00 $510000*(62000/60000) $ 527,000.00 Less: Variable Cost Direct Material $ 62,000.00 $ 51,000.00 $51000*(62000/60000) $ 52,700.00 Direct Labor $ 80,000.00 $ 90,000.00 $90000*(62000/60000) $ 93,000.00 Variable Overhead $ 87,000.00 $ 90,000.00 $90000*(62000/60000) $ 93,000.00 Marketing $ 15,000.00 $ 15,000.00 $15000*(62000/60000) $ 15,500.00 Administerative $ 14,000.00 $ 15,000.00 $15000*(62000/60000) $ 15,500.00 Total Variable cost $ 258,000.00 $ 261,000.00 $261000*(62000/60000) $ 269,700.00 Contribution Margin $ 232,000.00 $ 249,000.00 $249000*(62000/60000) $ 257,300.00 Less: Fixed Cost Manufacturing $ 104,000.00 $ 102,000.00 Marketing $ 23,000.00 $ 15,000.00 Administeration $ 82,300.00 $ 81,000.00 Total Fixed cost $ 209,300.00 $ 198,000.00 Operating Profit $ 22,700.00 $ 51,000.00 Sales Activity Variance Flexible Budget Sales Activity Variance Master Budget Sales Revenue $ 527,000.00 17000(F) $ 510,000.00 Less: Variable Cost Direct Material $ 52,700.00 1700(U) $ 51,000.00 Direct Labor $ 93,000.00 3000(U) $ 90,000.00 Variable Overhead $ 93,000.00 3000(U) $ 90,000.00 Marketing $ 15,500.00 500(U) $ 15,000.00 Administerative $ 15,500.00 500(U) $ 15,000.00 Total Variable cost $ 269,700.00 8000(U) $ 261,000.00 Contribution Margin $ 257,300.00 8300(F) $ 249,000.00 Less: Fixed Cost Manufacturing $ 102,000.00 $ 102,000.00 Marketing $ 15,000.00 $ 15,000.00 Administeration $ 81,000.00 $ 81,000.00 Total Fixed cost $ 198,000.00 $ 198,000.00 Operating Profit $ 59,300.00 8300(F) $ 51,000.00 Profit Variance Analysis Actual(A) Manufacturing Variance=(A)-(B) Marketing & Administrative Variance Sales Price Variance=(A)-(B) Flexible Budget=(B) Sales Activity Variance Master Budget Sales Revenue $ 490,000.00 37000(U) $ 527,000.00 17000(F) $ 510,000.00 Less: Variable Cost Direct Material $ 62,000.00 9300(U) $ 52,700.00 1700(U) $ 51,000.00 Direct Labor $ 80,000.00 13000(F) $ 93,000.00 3000(U) $ 90,000.00 Variable Overhead $ 87,000.00 6000(F) $ 93,000.00 3000(U) $ 90,000.00 Marketing $ 15,000.00 500(F) $ 15,500.00 500(U) $ 15,000.00 Administerative $ 14,000.00 1500(F) $ 15,500.00 500(U) $ 15,000.00 Total Variable cost $ 258,000.00 $ 269,700.00 8000(U) $ 261,000.00 Contribution Margin $ 232,000.00 9700(F) 2000(F) 37000(U) $ 257,300.00 8300(F) $ 249,000.00 Less: Fixed Cost Manufacturing $ 104,000.00 2000(U) $ 102,000.00 $ 102,000.00 Marketing $ 23,000.00 8000(U) $ 15,000.00 $ 15,000.00 Administeration $ 82,300.00 1300(U) $ 81,000.00 $ 81,000.00 Total Fixed cost $ 209,300.00 $ 198,000.00 $ 198,000.00 Operating Profit $ 22,700.00 7700(F) 7300(U) 37000(U) $ 59,300.00 8300(F) $ 51,000.00