Perez Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Planned fixed costs Manufacturing overhead Selling, general, and administrative Perez planned to make and sell 25,000 copies of the book. $36.50 8.60 4.40 5.70 7.10 $ 131,000 50,000 Required: a.-d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 24,000 and 26,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 26,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance).
Perez Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price Materials cost Labor cost Overhead cost Selling, general, and administrative costs Planned fixed costs Manufacturing overhead Selling, general, and administrative Perez planned to make and sell 25,000 copies of the book. $36.50 8.60 4.40 5.70 7.10 $ 131,000 50,000 Required: a.-d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 24,000 and 26,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 26,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Perez Publications Standard Costs and Budgeting**
Perez Publications established the following standard price and costs for a hardcover picture book that the company produces:
**Standard Price and Variable Costs:**
- Sales price: $36.50
- Materials cost: $8.60
- Labor cost: $4.40
- Overhead cost: $5.70
- Selling, general, and administrative costs: $7.10
**Planned Fixed Costs:**
- Manufacturing overhead: $131,000
- Selling, general, and administrative: $50,000
Perez planned to make and sell 25,000 copies of the book.
**Required:**
a. – d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 24,000 and 26,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 26,000 units. Indicate whether the variances are favorable (F) or unfavorable (U).
*Note: Select "None" if there is no effect (i.e., zero variance).*
**Table Description:**
The table includes the following columns:
- **Master Budget** (based on 25,000 units)
- **Flexible Budgets** (for production volumes of 24,000 and 26,000 units)
- **Volume Variances**
The rows are corresponding to:
- Number of units
- Variable manufacturing costs
- Fixed costs
The table is used to calculate and compare the budgets and variances under different production scenarios.
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