Gibson Company has provided the following for the year. Budget Sales$510,000 Variable product costs 192,000 Variable selling expense 46,000 Other variable expenses 3,200 Fixed product costs 16,400 Fixed selling expense 23,400 Other fixed expenses 1,400 Interest expense 760 Variances Sales 8,300UVariable product costs 4,400FVariable selling expense 2,300UOther variable expenses 1,500UFixed product costs 280FFixed selling expense 400FOther fixed expenses 190UInterest expense 100F Requireda. Prepare in good form a budgeted and actual income statement for internal use. Separate operating income from net income in the statements and indicate whether each variance is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) GIBSON COMPANYInternal Income Statement BudgetActualVarianceEffectSales Variable expenses: 00 Fixed expenses: 00 $0$0

The variance is favorable when budgeted costs are more than the actual costs incurred. The variance…

Answered: Gibson Company has provided the…

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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Question

Gibson Company has provided the following for the year.


Budget
Sales	$	510,000
Variable product costs		192,000
Variable selling expense		46,000
Other variable expenses		3,200
Fixed product costs		16,400
Fixed selling expense		23,400
Other fixed expenses		1,400
Interest expense		760
Variances
Sales		8,300	U
Variable product costs		4,400	F
Variable selling expense		2,300	U
Other variable expenses		1,500	U
Fixed product costs		280	F
Fixed selling expense		400	F
Other fixed expenses		190	U
Interest expense		100	F

Required

a. Prepare in good form a budgeted and actual income statement for internal use. Separate operating income from net income in the statements and indicate whether each variance is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

GIBSON COMPANY
Internal Income Statement
	Budget	Actual	Variance	Effect
Sales
Variable expenses:




	0	0
Fixed expenses:




	0	0

	$0	$0

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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