Chapter 15, Problem 7E

Exercise 8-4A Determining sales and variable cost volume variances

Required

Use the information provided in Exercise 8-1 A.

1. a. Determine the sales and variable cost volume variances.
2. b. Classify the variances as favorable (F) or unfavorable (U).
3. c. Comment on the usefulness of the variances with respect to performance evaluation and identify the member of the management team most likely to be responsible for these variances.
4. d. Determine the amount of fixed cost that will appear in the flexible budget.
5. e. Determine the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity. Assuming Cherokee uses information in the master budget to price the company’s product, comment on how the fixed cost volume variance could affect the company's profitability. Round computations to two decimal points.