Assume that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 950 units for
Question:
Assume that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 950 units for $835 each. During this month, the company incurred $475,000 total variable costs and $180,000 total fixed costs. The master (static) budget data for the month are as given in Exhibit 14.1.
Required
1. Prepare a flexible budget for the production and sale of 950 units.
2. Compute for October 2019:
a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U).
b. The sales volume variance, in terms of contribution margin. Indicate whether this variance was favorable (F) or unfavorable (U).
3. Compute for October 2019:
a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U).
b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) or unfavorable (U).
c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U).
d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U).
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Cost Management A Strategic Emphasis
ISBN: 9781259917028
8th Edition
Authors: Edward Blocher, David F. Stout, Paul Juras, Steven Smith