The fixed budget for 21,000 units of production shows sales of $462,000; variable costs of $63,000; and fixed costs of $144,000. The company’s actual sales were 26,700 units at $543,400. Actual variable costs were $113,700 and actual fixed costs were $135,000. Prepare a flexible budget performance report. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.)
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.
The fixed budget for 21,000 units of production shows sales of $462,000; variable costs of $63,000; and fixed costs of $144,000.
The company’s actual sales were 26,700 units at $543,400. Actual variable costs were $113,700 and actual fixed costs were $135,000.
Prepare a flexible budget performance report. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.)
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