Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 150,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials Direct labor (3 pounds @ $2) $6 (8.25 hours @$32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs $ 10,300 1,010 1,217 648 $2,867 $7,433 Fixed manufacturing overhead 1,565 Nonmanufacturing costs 2,130 Total fixed costs $3,695 $ 3,738 Operating profit Required: Prepare a profit variance analysis. Note: Enter your answers In thousands of dollars. Indicate the effect of each varlance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.
Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 150,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials Direct labor (3 pounds @ $2) $6 (8.25 hours @$32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs $ 10,300 1,010 1,217 648 $2,867 $7,433 Fixed manufacturing overhead 1,565 Nonmanufacturing costs 2,130 Total fixed costs $3,695 $ 3,738 Operating profit Required: Prepare a profit variance analysis. Note: Enter your answers In thousands of dollars. Indicate the effect of each varlance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the
company to manufacture and sell 150,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one
case of pet food follows:
Direct materials
Direct labor
(3 pounds @$2)
(8.25 hours @ $32)
$ 6
8
Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead
rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the
coming year.
At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable.
The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products:
Sales revenue
Less variable costs
Direct materials
Direct labor
Variable overhead
Total variable costs
Contribution margin
Less fixed costs
Fixed manufacturing overhead
Nonmanufacturing costs
Total fixed costs
Operating profit
$ 10,300
1,010
1,217
640
$ 2,867
$ 7,433
1,565
2,130
$3,695
$ 3,738
Required:
Prepare a profit variance analysis.
Note: Enter your answers in thousands of dollars. Indicate the effect of each varlance by selecting "F" for favorable, or "U" for
unfavorable. If there is no effect, do not select either option.
GOLDEN FOOD PRODUCTS
Profit Variance Analysis
Actual
Manufacturing
Variances
Sales revenue
Materials
S 10,300
1,010
U
Direct labor
1,217
F
Variable overhead
640
P
Total variable costs
$
2,867
P
Contribution margin
S
7,433
P
Fixed costs:
Non-Manufacturing
Variances
Sales Price
Variance
Flexible
Budget
Sales Activity
Variance
Master
Budget
F
$ 158,000
F
Ս
2
2
$
0
$
0
EL
$ 158,000
F
$
0
Manufacturing
1,565
2
Non-manufacturing
2,130
F
Total fixed costs
$
3,695
Մ
F
$
0
$
0
Operating profits
S
3,738
2
$
158,000
$
0
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