The master budget at Monroe Manufacturing last period called for sales of 42,000 units at $42 each. The costs were estimated to be $26 variable per unit and $524,000 fixed. During the period, actual production and actual sales were 45,000 units. The selling price was $41 per unit. Variable costs were $28 per unit. Actual fixed costs were $515,000. Required: Prepare a sales activity variance analysis. Note: 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. Monroe Manufacturing Sales Activity Variance Flexible Budget Sales Activity Variance Favorable or Unfavorable Master Budget Sales revenue Less: variable costs Contribution margin Less: Fixed Costs Operating Profits
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
Required:
Prepare a sales activity variance analysis.
Note: 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.
| Monroe Manufacturing | ||||
| Sales Activity Variance | ||||
| Flexible Budget | Sales Activity Variance | Favorable or Unfavorable | Master Budget | |
| Sales revenue | ||||
|
Less: variable costs |
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| Contribution margin | ||||
|
Less: Fixed Costs |
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| Operating Profits |
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