Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 123,500 cases at a budgeted price of $67 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 $12 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 $39
Golden Food Products produces special-formula pet food. The company carries no inventories. The
| Direct materials | (3 pounds @ $2) | $ 6 |
|---|---|---|
| Direct labor | (0.25 hours @ $32) | 8 |
Variable
At the end of the year, the costs analyst reported that the sales activity variance for the year was $392,000 favorable.
The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products:
| Sales revenue | $ 7,800 |
|---|---|
| Less variable costs | |
| Direct materials | 800 |
| Direct labor | 992 |
| Variable overhead | 515 |
| Total variable costs | $ 2,307 |
| Contribution margin | $ 5,493 |
| Less fixed costs | |
| Fixed manufacturing overhead | 1,515 |
| Nonmanufacturing costs | 2,160 |
| Total fixed costs | $ 3,675 |
| Operating profit | $ 1,818 |
Required:
What are the fixed overhead price and production volume variances for Golden Food Products?
Note: Enter your answers in whole 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.
Variance analysis is a method of assessing the different between estimated budgets and actual numbers. It is the comparison of actual and budgeted outcomes and data.
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