Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries noinventories. The master budget calls for the company to manufacture and sell 110,000 liters at a budgeted price of $150 per liter thisyear. The standard direct cost sheet for one liter of the preservative follows.(2 pounds @ $9)(0.5 hours e $34)Direct materials$18Direct labor17Variable overhead is applied based on direct labor hours. The variable overhead rate is $70 per direct-labor hour. The fixed overheadrate (at the master budget level of activity) is $35 per unit. All non-manufacturing costs are fixed and are budgeted at $1.7 million forthe coming year.At the end of the year, the costs analyst reported that the sales activity variance for the year was $480,000 unfavorable.The following is the actual income statement (in thousands of dollars) for the year.Sales revenue$15,838Less variable costsDirect materials1,738Direct labor1,060Variable overhead980$ 3,778$12,060Total variable costsContribution marginLess fixed costsFixed manufacturing overheadNon-manufacturing costs1,1001,280$ 2,380$ 9,680Total fixed costsOperating profitRequired:Prepare a profit variance analysis. (Enter your answers in thousands of dollars. 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.) PAYNESVILLE CORPORATIONProfit Variance AnalysisSales PriceVarianceSales ActivityVarianceMasterBudgetManufacturingNon-ManufacturingVariancesFlexibleActualVariancesBudgetSales revenue$15,838Materials1,738Direct labor1,060Variable overhead980Total variable costs$3,778Contribution margin$12,060$$Fixed costs:Manufacturing1,100Non-manufacturing1,280Total fixed costs$2,380$Operating profits$9,680$$

Name: Paynesville Corporation manufactures and sells a preservative used in
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Description: Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries noinventories. The master budget calls for the company to manufacture and sell 110,000 liters at a budgeted price of $150 per lite

Profit variance analysis refers to the concept which evaluates the difference between actual profit…

Business

Accounting

2 pounds e $9) 5 hours @ $34) $18 17 based on direct labor hours. The variable vel of activity) i is $35 per unit. All non-manu sts analyst reported that the sales activity come statement (in thousands of dollars) fe $15,838

2 pounds e $9) 5 hours @ $34) $18 17 based on direct labor hours. The variable vel of activity) i is $35 per unit. All non-manu sts analyst reported that the sales activity come statement (in thousands of dollars) fe $15,838

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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