Prepare a profit variance analysis. (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.) The image presents a problem involving budget variance analysis for Western Company. The master budget anticipated sales of 225,000 units at $9 each, with a cost structure of $3.75 variable cost per unit and $225,000 fixed costs. However, actual production and sales were 230,000 units with a selling price of $9.10 per unit. Variable costs were $4.50 per unit, and actual fixed costs were $225,000.**Task:** Prepare a profit variance analysis using the table provided. Indicate whether each variance is favorable ("F") or unfavorable ("U"). If there is no effect, do not select any option.**Table Breakdown:**- **WESTERN COMPANY** **Profit Variance Analysis** The table consists of six columns: 1. **Actual Budget** 2. **Manufacturing Variances** 3. **Sales Price Variance** 4. **Flexible Budget** 5. **Sales Activity Variance** 6. **Master Budget** **Rows for Analysis:** - Sales revenue - Less: Variable costs - Contribution margin - Less: Fixed costs - Operating profitsEach section of the table is meant to calculate and compare the financial outcomes based on actual figures versus budgeted figures, enabling a clearer assessment of where variances occurred and categorizing them as either favorable or unfavorable.

Profit variance analysis of Western company is as under: Western Company Profit Variance Analysis Particulars Reported income statement (230000 units) Manufacturing variance Sales price variance Flexible budget (230000 units) Sales activity variance Master budget (225000 units) Sales revenue $2,093,000.00 $23,000.00 F $2,070,000.00 $45,000.00 F $2,025,000.00 Less: Variable costs $1,035,000.00 $172,500.00 U $862,500.00 $18,750.00 U $843,750.00 Contribution margin $1,058,000.00 $172,500.00 U $23,000.00 F $1,207,500.00 $26,250.00 F $1,181,250.00 Less: fixed costs $225,000.00 $225,000.00 $225,000.00 Operating profits $833,000.00 $172,500.00 U $23,000.00 F $982,500.00 $26,250.00 F $956,250.00

Business

Accounting

The master budget at Western Company last period called for sales of 225,000 units at $9 each. The costs were estimated to be $3.75 variable per unit and $225,000 fixed. During the period, actual production and actual sales were 230,000 units. The selling price was $9.10 per unit. Variable costs were $4.50 per unit. Actual fixed costs were $225,000. Required: Prepare a profit variance analysis. (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.)

The master budget at Western Company last period called for sales of 225,000 units at $9 each. The costs were estimated to be $3.75 variable per unit and $225,000 fixed. During the period, actual production and actual sales were 230,000 units. The selling price was $9.10 per unit. Variable costs were $4.50 per unit. Actual fixed costs were $225,000. Required: Prepare a profit variance analysis. (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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Which of the following is FALSE regarding variances? O A favorable variance, when it occurred, are…

A: The method of costing used to determine deviations is referred to as standard costing. The standard…

Q: How do you decide if the variance is favorable or unfavorable?

A: The discrepancy between budgeted and actual amounts is known as a "variance" in the accounting…

Q: What is the expected return? What is the variance? What is the standard deviation?

A: State Probability Returns Boom 0.25 0.15 Normal 0.50 0.08 Slow down 0.15 0.04…

Q: Are the unfavorable variances always bad? Are the favorable variances always good? Why

A: Variance analysis is an important aspect of accounting. In variance analysis we compare the actual…

Q: Discuss the difference between a price-weighted index and a value-weighted index. Give one example…

A: "Hi, Thanks for the Question. Since you asked multiple question, we will answer first question for…

Q: Which one of the following measures is relevant for assessing exposure to systematic risk?

A: Systematic Risk: It refers to the risk caused by factors that are not in the control of an…

Q: Explain favourable variance.

A: Definition: Variance analysis: Variance analysis is the process of evaluating the differences…

Q: Calculate the following and determine if variances are favorable

A: Compute the total standard material cost.

Q: Explain what is meant by and the limits of mean variance analysis when it comes to investment…

A: Mean-Variance Analysis is an investment decision tool technique that is used by investors to make…

Q: During the control function, the measurements taken of the performance must be accurate enough to…

A: In a corporation, control seems to be a major goal-oriented function of management. This is the…

Q: If two returns are positively related to each other, they will have a ________, and if they are…

A: In the given question we are given 4 options regarding a statement and we need to choose correct…

Q: xplain the shape of the Markowitz (that is, mean-variance) efficient frontier, specifically what…

A: Markowitz (that is, mean-variance) efficient frontier-It is also known as mean - variance model and…

Q: In two or three paragraphs explain the purpose of variance analysis and its benefits and drawbacks.

Q: Obtaining regression estimates for cost estimation requires establishing the existence of a logical…

A: The objective of the question is to identify the term that is not used to refer to the activities in…

Q: Variance percentage is calculated by dividing the choose your answer... by the choose your answer...

A: Variation refers to the difference i.e. the difference between the current amounts with the budgeted…

Q: Note: Use the minus sign to indicate negative values (when the budgeted amount is greater than the…

A: In the variance analysis, the actual cost incurred, and the standard cost are compared with each…

Q: Distinguish between a favorable variance and an unfavorable variance.

A: Favorable Variance: Favorable variance is the variation in the actual and planned output which is…

Q: When management uses variance reports to evaluate cost control, they look into which of the…

A: Standard costing means where standard is set for various cost element and actual cost is then…

Q: he variance of expected returns is equal to the square root of the expected returns. a. True b.…

A: Formula for variance:S2=∑(Xi-X̄) 2/n S2=VarianceXi=Value of one observationX̄=Mean value of all…

Q: Differentiate between variance analysis and sensitivity analysis

A: Managers of small businesses can benefit from both variance and sensitivity analyses when trying to…

Q: differences between Weighted Average and FIFO methods

A: Weighted Average and FIFO methods are used to value inventory of business.

Question

Prepare a profit variance analysis. (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.)

The image presents a problem involving budget variance analysis for Western Company. The master budget anticipated sales of 225,000 units at $9 each, with a cost structure of $3.75 variable cost per unit and $225,000 fixed costs. However, actual production and sales were 230,000 units with a selling price of $9.10 per unit. Variable costs were $4.50 per unit, and actual fixed costs were $225,000.

**Task:**
Prepare a profit variance analysis using the table provided. Indicate whether each variance is favorable ("F") or unfavorable ("U"). If there is no effect, do not select any option.

**Table Breakdown:**

- **WESTERN COMPANY**
**Profit Variance Analysis**
The table consists of six columns:
1. **Actual Budget**
2. **Manufacturing Variances**
3. **Sales Price Variance**
4. **Flexible Budget**
5. **Sales Activity Variance**
6. **Master Budget**

**Rows for Analysis:**
- Sales revenue
- Less: Variable costs
- Contribution margin
- Less: Fixed costs
- Operating profits

Each section of the table is meant to calculate and compare the financial outcomes based on actual figures versus budgeted figures, enabling a clearer assessment of where variances occurred and categorizing them as either favorable or unfavorable.

Definition Definition Analysis of a difference between planned and actual behavior. After analyzing differences, companies find the reasons for variance so that the necessary steps should be taken to correct that variance.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Investor is considering using semi-variance instead of variance. State the argument in favour of using semi-variance instead of variance. Under what circumstance would the use of semi-variance not make any difference? a) b)
What is unfavorable variance? Give three examples?
How can we determine the mean and variance of the NPW on the basis of the three NPW estimates?
Variance analysis is very important because of all of the following reasons except: Select one: a. It helps in gaining an insight into the reason behind the good performance b. It helps in fixing the responsibility c. It acts as a control mechanism. d. It aids into taking an immediate action
What does the concept of ‘management by exception’ mean and what factors are considered when assessing the significance of a variance?