Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 162,000 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 (3 pounds @ $2) $ 6 Direct labor (0.25 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 $ 11,300 Less variable costs   Direct materials 1,094 Direct labor 1,307 Variable overhead 690 Total variable costs $ 3,091 Contribution margin $ 8,209 Less fixed costs   Fixed manufacturing overhead 1,695 Nonmanufacturing costs 2,132 Total fixed costs $ 3,827 Operating profit $ 4,382 Required: Prepare a profit variance analysis. Note: 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 162,000 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 (3 pounds @ $2) $ 6
Direct labor (0.25 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 $ 11,300
Less variable costs  
Direct materials 1,094
Direct labor 1,307
Variable overhead 690
Total variable costs $ 3,091
Contribution margin $ 8,209
Less fixed costs  
Fixed manufacturing overhead 1,695
Nonmanufacturing costs 2,132
Total fixed costs $ 3,827
Operating profit $ 4,382

Required:

Prepare a profit variance analysis.

Note: 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.

 

 

 

Sales revenue
Materials
Direct labor
Variable overhead
Total variable costs
Contribution margin
Fixed costs:
Manufacturing
Non-manufacturing
Total fixed costs
Operating profits
$
$
$
$
Actual
$
11,300
1,094
1,307
690
3,091
8,209
1,695
2,132
3,827
4,382
GOLDEN FOOD PRODUCTS
Profit Variance Analysis
Manufacturing
Variances
Non-Manufacturing
Variances
Sales Price
Variance
Flexible
Budget
Sales Activity
Variance
Master
Budget
Transcribed Image Text:Sales revenue Materials Direct labor Variable overhead Total variable costs Contribution margin Fixed costs: Manufacturing Non-manufacturing Total fixed costs Operating profits $ $ $ $ Actual $ 11,300 1,094 1,307 690 3,091 8,209 1,695 2,132 3,827 4,382 GOLDEN FOOD PRODUCTS Profit Variance Analysis Manufacturing Variances Non-Manufacturing Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget
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