Managers at Marigold, Inc. were cautiously optimistic about receiving their bonuses at year-end. Periodic communications from the top noted that the sales team had been exceeding targets throughout the year, which led to steady production activity to keep pace. Managers knew that a company profit margin of 13% meant bonuses for everyone. The production crew had been managing costs well but wasn’t sure where final costs would land with the sales volume higher than planned. The following information outlines actual and budgeted results for the year. Actual Master Budget Sales volume (units) 51,800 44,400 Selling price $14.30 $13.90 DM cost/unit $2.80 $2.70 DL cost/unit $1.75 $1.80 Variable-MOH cost/unit $1.40 $1.40 Variable SG&A cost/unit $0.60 $0.60 Fixed-MOH cost $186,000 $176,100 Fixed SG&A cost $123,000 $118,100 (a) Prepare Marigold’s flexible budget and actual income statement for the year. Per unit Actual Flexible Budget Per unit Sales volume 51,800 51,800 Sales $14.30 $enter a dollar amount $enter a dollar amount $13.90 Variable costs: Direct materials 2.80 enter a dollar amount enter a dollar amount 2.70 Direct labor 1.75 enter a dollar amount enter a dollar amount 1.80 Variable-MOH 1.40 enter a dollar amount enter a dollar amount 1.40 Variable SG&A 0.60 enter a dollar amount enter a dollar amount 0.60 Contribution margin $7.75 enter a total amount for the first part enter a total amount for the first part $7.40 Fixed costs: Fixed-MOH enter a dollar amount enter a dollar amount Fixed SG&A enter a dollar amount enter a dollar amount Operating income $enter a total operating income amount $enter a total operating income amount Determine the flexible budget variances and sales price variance, noting the amount and sign for each. Flexible Budget Variance Sales $enter a dollar amount select an option Variable costs: Direct materials enter a dollar amount select an option Direct labor enter a dollar amount select an option Variable-MOH enter a dollar amount select an option Variable SG&A enter a dollar amount select an option Contribution margin enter a total amount for the first part select an option Fixed costs: Fixed-MOH enter a dollar amount select an option Fixed SG&A enter a dollar amount select an option Operating income $enter a total operating income amount select an option

Managers at Marigold, Inc. were cautiously optimistic about receiving their bonuses at year-end. Periodic communications from the top noted that the sales team had been exceeding targets throughout the year, which led to steady production activity to keep pace. Managers knew that a company profit margin of 13% meant bonuses for everyone. The production crew had been managing costs well but wasn’t sure where final costs would land with the sales volume higher than planned. The following information outlines actual and budgeted results for the year. Actual Master Budget Sales volume (units) 51,800 44,400 Selling price $14.30 $13.90 DM cost/unit $2.80 $2.70 DL cost/unit $1.75 $1.80 Variable-MOH cost/unit $1.40 $1.40 Variable SG&A cost/unit $0.60 $0.60 Fixed-MOH cost $186,000 $176,100 Fixed SG&A cost $123,000 $118,100 (a) Prepare Marigold’s flexible budget and actual income statement for the year. Per unit Actual Flexible Budget Per unit Sales volume 51,800 51,800 Sales $14.30 $enter a dollar amount $enter a dollar amount $13.90 Variable costs: Direct materials 2.80 enter a dollar amount enter a dollar amount 2.70 Direct labor 1.75 enter a dollar amount enter a dollar amount 1.80 Variable-MOH 1.40 enter a dollar amount enter a dollar amount 1.40 Variable SG&A 0.60 enter a dollar amount enter a dollar amount 0.60 Contribution margin $7.75 enter a total amount for the first part enter a total amount for the first part $7.40 Fixed costs: Fixed-MOH enter a dollar amount enter a dollar amount Fixed SG&A enter a dollar amount enter a dollar amount Operating income $enter a total operating income amount $enter a total operating income amount Determine the flexible budget variances and sales price variance, noting the amount and sign for each. Flexible Budget Variance Sales $enter a dollar amount select an option Variable costs: Direct materials enter a dollar amount select an option Direct labor enter a dollar amount select an option Variable-MOH enter a dollar amount select an option Variable SG&A enter a dollar amount select an option Contribution margin enter a total amount for the first part select an option Fixed costs: Fixed-MOH enter a dollar amount select an option Fixed SG&A enter a dollar amount select an option Operating income $enter a total operating income amount select an option

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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	Actual	Master Budget
Sales volume (units)	51,800	44,400
Selling price	$14.30	$13.90
DM cost/unit	$2.80	$2.70
DL cost/unit	$1.75	$1.80
Variable-MOH cost/unit	$1.40	$1.40
Variable SG&A cost/unit	$0.60	$0.60
Fixed-MOH cost	$186,000	$176,100
Fixed SG&A cost	$123,000	$118,100

(a)

Prepare Marigold’s flexible budget and actual income statement for the year.

	Per unit	Actual	Flexible Budget	Per unit
Sales volume		51,800	51,800

Sales	$14.30	$enter a dollar amount	$enter a dollar amount	$13.90
Variable costs:
Direct materials	2.80	enter a dollar amount	enter a dollar amount	2.70
Direct labor	1.75	enter a dollar amount	enter a dollar amount	1.80
Variable-MOH	1.40	enter a dollar amount	enter a dollar amount	1.40
Variable SG&A	0.60	enter a dollar amount	enter a dollar amount	0.60
Contribution margin	$7.75	enter a total amount for the first part	enter a total amount for the first part	$7.40
Fixed costs:
Fixed-MOH		enter a dollar amount	enter a dollar amount
Fixed SG&A		enter a dollar amount	enter a dollar amount
Operating income		$enter a total operating income amount	$enter a total operating income amount

Determine the flexible budget variances and sales price variance, noting the amount and sign for each.

	Flexible Budget Variance
Sales	$enter a dollar amount	select an option
Variable costs:
Direct materials	enter a dollar amount	select an option
Direct labor	enter a dollar amount	select an option
Variable-MOH	enter a dollar amount	select an option
Variable SG&A	enter a dollar amount	select an option
Contribution margin	enter a total amount for the first part	select an option
Fixed costs:
Fixed-MOH	enter a dollar amount	select an option
Fixed SG&A	enter a dollar amount	select an option
Operating income	$enter a total operating income amount	select an option

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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Determine the flexible budget variances and sales price variance, noting the amount and sign for each.

	Flexible Budget Variance
Sales	$enter a dollar amount	select an option
Variable costs:
Direct materials	enter a dollar amount	select an option
Direct labor	enter a dollar amount	select an option
Variable-MOH	enter a dollar amount	select an option
Variable SG&A	enter a dollar amount	select an option
Contribution margin	enter a total amount for the first part	select an option
Fixed costs:
Fixed-MOH	enter a dollar amount	select an option
Fixed SG&A	enter a dollar amount	select an option
Operating income	$enter a total operating income amount	select an option

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(d1)

Did the company hit its target profit margin? (Round answers to 2 decimal places, e.g. 15.25%.)

		Actual		Flexible Budget
Profit margin		enter percentages rounded to 2 decimal places %		enter percentages rounded to 2 decimal places %

The company select an option

its 13% profit margin target.

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