Determining sales and variable cost volume variances Required Use the information provided in Exercise 8-3B. a. Determine
Question:
Determining sales and variable cost volume variances
Required
Use the information provided in Exercise 8-3B.
a. Determine the sales and variable cost volume variances.
b. Classify the variances as favorable or unfavorable.
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.
d. Determine the amounts of fixed cost that will appear in the flexible budget.
e. Determine the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity. Assuming Clyde uses information in the master budget to price its product, explain how the fixed cost volume variance could affect the company’s profitability.
Step by Step Answer:
Master Budget 18000 Units Flexible Budget 19000 Units a b Volume Variances Sales 360000 380000 20000F Variable manufacturing 216000 228000 12000 U c Since the per unit sales price and per unit variable manufacturing costs are the same for both the master and flexible budgets the activity variances are solely attributable to the fact that sales volume was 1000 units more than planned The favorable 20000 sales volume variance suggests that increased sales are beneficial However Clyde needs more information before drawing this conclusion The increase in sales may have resulted from reducing the actual sales price which could produce negative consequences The unfavorable 12000 variable cost volume variance is misleading The total amount of variable costs is expected to increase when volume increases This variance is expected and not a bad thing Upperlevel marketing managers are normally responsible for the sales and variable cost volume variances d The amount of fixed costs appearing in the flexible budget is 20000 for manufacturing costs and 18000 for fixed selling and administrative costs The fixed costs in both the master and flexible budgets are estimates Fixed costs are estimated to be the same regardless of the volume of production and sales e Master Budget Flexible Budget Fixed manufacturing 20000 20000 ...View the full answer
Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
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