Byrd Company is a manufacturer affiliated with the furniture industry. The company produces a wide variety of €œhardware€ component parts. Product examples include drawer slides, hinges, door pulls and handles, springs, and locks. Dent Tripoli is the company€™s new chief financial officer. Dent is very concerned with providing the company€™s president and board of directors with accurate financial reports. He is concerned that the company€™s use of static budgeting does not convey a fair presentation of the company€™s performance. The following contribution margin format income statement reports the results of Byrd Company€™s operations for the last quarter of 2009.

Byrd€™s 2009 budgets were based on production and sales of 375,000 units at an average selling price of $6. At that volume, variable manufacturing costs were budgeted to be $2.50 per unit, and variable marketing and administrative costs were budgeted to be $2.00 each. Had the company€™s actual performance equaled the budgeted performance, Byrd would have reported operating profit of $62,500.

Required
A. Based on the information provided in the problem, recreate Byrd€™s 2009 static budget. Be sure to include a comparison between the static budget and the actual results for the year.
B. Based on the information provided in the problem, prepare a flexible budget for Byrd for 2009. Be sure to include a comparison between the flexible budget and the actual results that reports the flexible budget variance.
C. Calculate Byrd€™s sales price variance for 2009. Is the variance favorable or unfavorable?
D. Calculate Byrd€™s sales volume variance for2009.

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Sales Revenues (400,000 units) Variable Costs Manufacturing Marketing and administrative Contribution margin Fixed Costs Manufacturing Marketing and administrative Operating profit $2,440,000 $1,060,000 748,000 ,,000 808 $ 632,000 $400,000 200,000 600,000 $ 32,000