Crafts Inc., is a manufacturer of furniture. The company has 2 responsibility ce
ID: 2572347 • Letter: C
Question
Crafts Inc., is a manufacturer of furniture. The company has 2 responsibility centers: Production and Selling and Distribution. Production and administration are cost centers while Selling and Distribution is a profit center Presented below are the budgeted and actual contribution income statement for October along with applicable unit information. Budgeted unit information: Units Sale price per unit Direct material per unit Direct labor per unit 900 $250 $50 Variable $15 overhead per unit Variable selling and distribution per unit 60 Actual Units Craft Inc Budgeted Contribution Income Statement For Month of October Sales $225,000 Less Variable costs Variable cost of goods sold: $45,000 Direct materials Direct labor Manufacturing overhead 18,000 13,500 76,500 30,500) 94,500 Selling and distribution 54,000 Contribution Margin Less Fixed Costs Manufacturing overhead Selling and Distribution 40,000 30,000 Net Income Craft Inc Actual Contribution Income Statement For Month of October Sales S 275,000 Less Variable costs Variable cost of goods sold: Direct materials Direct labor Manufacturing overhead S 50,000 25,000 20,000 $ 95,000 183,000 92,000 Selling and distribution 88,000 Contribution Margin Less Fixed Costs Manufacturing overhead Selling and Distribution 38,000 40,000 78,000 Net Income(Loss)Explanation / Answer
3. Revenue Variance = Actual Sales - Budgeted Sales
= $275,000 - $225,000 = 50,000 Favorable
4. Sales Price Variance
Sales Price Variance = (Actual sale price per unit - Budgeted sales price per unit) x actual units sold
Actual sales price per unit = Total sales / actual units sold
= $275,000 / 1,000 = $275 per unit
Budgeted Sales per unit = $250
Actual units = 1,000
Sales Price Variance = (275 - 250) x 1,000 = 25,000 Favorable
5. Sales volume variance
Sales Volume Variance = (Actual units sold - budgeted sale units) x Standard Sale price per unit
Budgeted Sale unit = 900
Actual sales unit = 1,000
Standard price per unit = 250
Sales Volume Variance = (1,000 - 900) x $250 = 25,000 Favorable
Revenue Variance = Sales Volume Variance + Sales Price Variance
= 25,000 + 25,000 = 50,000 Favourable