QQuestionAnatomy and Physiology
QuestionAnatomy and Physiology
Quindo Table Company manufactures tables for schools. The 2015 operating budget is based on sales of 44,000 units at $\$ 1$ per table. Operating income is anticipated to be $\$ 220,1$. Budgeted variable costs are $\$ 1$ per unit, while fixed costs total $\$ 660,1$.
Actual income for 2015 was a surprising $\$ 477,1$ on actual sales of 46,000 units at $\$ 1$ each. Actual variable costs were $\$ 1$ per unit and fixed costs totaled $\$ 627,1$.
Required: Prepare a variance analysis report with both flexible-budget and sales-volume variances. Quindo Table Company Variance Analysis
| | Actual
Results | Flexible
Variances | Flexible
Budget | Volume
Variances | Sales-
Static |
| --- | --- | --- | --- | --- | --- |
| Units sold | A) | B) | C) | D) | E) |
| Sales | F) | G) | H) | I) | J) |
| Variable costs | K) | L) | M) | N) | O) |
| Contribution
margin | P) | Q) | R) | S) | T) |
| Fixed costs | U) | V) | 660,000 | 0 | 660,000 |
| Operating
income | W) | X) | Y) | Z) | $\$ 220,1$ |
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Answer
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Step 1: Calculate the flexible budget for sales, variable costs, and contribution margin at the actual units sold.
Budgeted contribution margin per unit = $55/unit - $35/unit = $20/unit
The flexible budget for variable costs and contribution margin is calculated by multiplying the actual units sold by the budgeted variable cost per unit and the contribution margin per unit, respectively. Actual units sold = 46,000 units Budgeted variable cost per unit = $35 /unit Flexible budget for variable costs (C) = Actual units sold * Budgeted variable cost per unit = 46,000 units * $35 /unit = $1,610,000 Contribution margin per unit = $20 /unit Flexible budget for contribution margin (R) = Actual units sold * Contribution margin per unit = 46,000 units * $20 /unit = $920,000
Step 2: Calculate the flexible budget variances for variable costs and contribution margin.
= $920,000 - $380,000
Flexible budget variance for variable costs (L) = Flexible budget for variable costs - Actual variable costs = $112,000 (Favorable) Flexible budget variance for contribution margin (Q) = Flexible budget for contribution margin - Actual contribution margin = $920,000 - Actual contribution margin (Actual contribution margin = Actual sales - Actual variable costs) = $540,000 (Favorable)
Final Answer
Quindo Table Company Variance Analysis Report: | Category | Actual Results | Flexible Variances | Volume Variances | Sales-Static Variance | | --- | --- | --- | --- | --- | | Units sold | 46,000 units | - | - | - | | Sales | $477,000 | $1,100,000 (F) | - | -$2,011,000 (U) | | Variable costs | $1,498,000 | $112,000 (F) | $700,000 (F) | - | | Contribution margin | $920,000 | $540,000 (F) | $400,000 (F) | - | | Fixed costs | $627,000 | - | - | - | | Operating income | $243,000 | - | - | - | Note: F denotes Favorable and U denotes Unfavorable variances.
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