Find Data for Profit
Required
Find the values of the missing items (a) through (x). Assume that actual sales volume equals actual production volume. (There are no inventory level changes.)
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Find the missing data to prepare profit variance analysis.
Explanation of Solution
Profit variance analysis:
The analysis that studies the difference between the actual operating profit and the standard operating profit is called the profit variance analysis.
Prepare profit variance analysis:
Actual Revenue & Costs | Manufacturing variance | Marketing and administrative variance | Sales price variance | Flexible budget | Sales Activity Variance | Master budget | |
Units Produced | 24,000(1) | 24,000 | 4,000F(2) | 20,000 | |||
Sales revenue | $39,600(7) | $3,600F | $36,000(6) | $6,000F(8) | $30,000 | ||
Less: Variable costs | |||||||
Manufacturing | $21,000(10) | $1,800U(9) | $19,200 | $3,200U | $16,000 | ||
Marketing &administrative costs | $4,320 | $480F(11) | $4,800 | $800U | $4,000 | ||
Contribution margin | $14,280(12) | $1,800U | $480F | $3,600F | $12,000 | $2,000F | $10,000 |
Less: Fixed Costs | |||||||
Manufacturing | $4,600(13) | $400F | $5,000(3) | $5,000 | |||
Marketing &administrative costs | $3,600 | $600U(16) | $3,000(4) | $3,000 | |||
Operating Profits | $6,080(14) | $1,400U(15) | $120U(17) | $3,600F | $4,000 | $2,000F | $2,000(5) |
Table: (1)
Working Note 1:
Actual units and fixed budget units:
Working Note 2:
Budgeted variable marketing and administrative cost:
Working Note 3:
Flexible budget fixed manufacturing cost:
Working Note 4:
Master budget fixed marketing and administrative cost:
Fixed cost in the master budget will be the same as given in the flexible budget which is $3,000.
Working Note 5:
Master budget operating profit:
Working Note 6:
Flexible budget sales revenue:
Working Note 7:
Actual sales revenue:
Working Note 8:
Sales activity variance:
Working Note 9:
Manufacturing variance will be equal to the total manufacturing variance which is $1,800U.
Working Note 10:
Actual variable manufacturing cost:
Working Note 11:
Marketing and administrative variance:
Working Note 12:
Contribution margin:
Working Note 13:
Actual fixed manufacturing cost:
Working Note 14:
Operating profit:
Working Note 15:
Total manufacturing variance:
Working Note 16:
Fixed marketing and administrative variance:
Working Note 17:
Total marketing and administrative variance:
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