Johns Manufacturing Company manufactures and sells rolling suitcases. After several years of increased sales, Johns experiences a drop in sales in 2020 from increased competition. Johns uses machine-hours as the cost-allocation base for variable and fixed manufacturing costs. Budgeted and actual costs for 2020 are as follows:

1. Calculate the variable overhead and fixed overhead variances (spending, efficiency, spending, and volume).
2. Create a chart like that in Exhibit 7-2 showing Flexible Budget Variances and Sales-Volume Variances for revenues, costs, contribution margin, and operating income.
3. Calculate the operating income based on budgeted profit per suitcase.
4. Reconcile the budgeted operating income from requirement 3 to the actual operating income from your chart in requirement 2.
5. Calculate the operating income volume variance and show how the sales-volume variance is composed of the production-volume variance and the operating income volume variance.

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Suitcases produced and sold Selling price Machine-hours Variable direct materials costs Variable direct manufacturing labor costs Variable overhead cost per machine-hour Variable overhead costs Fixed overhead costs Actual Results 120,000 $72 310,000 $20 per unit $18 per unit $527,000 $532,400 Static-Budget Amounts 150,000 $80 375,000 $20 per unit $18 per unit $1.80 per mach.-hr $525,000