Chapman Inc. sells a single product, Zud, which has a budgeted selling price of $39 per unit and a budgeted variable cost of $27 per unit. Budgeted fixed costs for the year amount to $52,500. Actual sales volume for the year (62,000 units) fell 10,500 units short of budgeted sales volume. Actual fixed costs were $53,500. With everything else held constant, what impact did the shortfall in volume have on profitability for the year? (Indicate whether the effect was favorable or unfavorable in terms of its effect on operating income.)
Chapman Inc. sells a single product, Zud, which has a budgeted selling price of $39 per unit and a budgeted variable cost of $27 per unit. Budgeted fixed costs for the year amount to $52,500. Actual sales volume for the year (62,000 units) fell 10,500 units short of budgeted sales volume. Actual fixed costs were $53,500. With everything else held constant, what impact did the shortfall in volume have on profitability for the year? (Indicate whether the effect was favorable or unfavorable in terms of its effect on operating income.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chapman Inc. sells a single product, Zud, which has a budgeted selling price of $39 per unit and a budgeted variable cost of $27 per unit. Budgeted fixed costs for the year amount to $52,500. Actual sales volume for the year (62,000 units) fell 10,500 units short of budgeted sales volume. Actual fixed costs were $53,500. With everything else held constant, what impact did the shortfall in volume have on profitability for the year? (Indicate whether the effect was favorable or unfavorable in terms of its effect on operating income.)
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