Home Insert Page Layout Formulas Data A Performance Report, June 2017 Actual Static Budget 447,000 2 Results 3 Units (pounds) 4 Revenues 5 Variable manufacturing costs 6 Contribution margin 460,000 $2,626,600 1,651,400 $ 975,200 $2,592,600 1,564,500 $1,028,100 Jeff Geller, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs went up, too. The bottom line is that contribution margin declined by $52,900, which is just over 2% of the budgeted rev- enues of $2,592,600. Overall, Geller feels that the business is running fine. 1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, and contribu- tion margin. What percentage is each static-budget variance relative to its static-budget amount? 2. Break down each static-budget variance into a flexible-budget variance and a sales-volume variance. 3. Calculate the selling-price variance. 4. Assume the role of management accountant at Cascade. How would you present the results to Jeff Geller? Should he be more concerned? If so, why? Required
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Flexible-budget and sales volume variances. Cascade, Inc., produces the basic llings used in many popular frozen desserts and treats—vanilla and chocolate ice creams, puddings, meringues, and fudge. Cascade uses standard costing
and carries over no inventory from one month to the next. The icecream product group’s results for June 2017 were as follows:
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