O Required information Self-Study Problem 14-1 Sales Volume and Flexible-Budget (FB) Variances/JIT Manufacturing [The following information applies to the questions displayed below.) Solid Box Fabrications manufactures boxes for workstations. The firm's standard cost sheet prior to October of the current year and actual results for October are as follows: Budget Information Standard Price Actual and Variable Fixed Results Costs per Unit Costs October Units 10,000 Sales $50.00 $ 580,000 Variable costs: Direct materials 5 pounds at $2.50 per pound $12.50 50, 100 lb*X $3 - $ 150, 300 Direct labor 0.50 hour at $15.00 per hour 7.50 5,050 hr x $16.80 - 84,840 Manufacturing overhead 2.00 19,000 Selling and administrative 5.00 55, 100 Total variable costs $27.00 $ 309, 240 Contribution margin $23.00 $ 270, 760 Fixed costs: Manufacturing (factory) overhead $ 54,000 $ 55,000 Selling and administrative 20,000 24,000 Total fixed costs $74,000 $ 79,000 Operating income $ 191,760 'Assume that pounds purchased = pounds issued to production (.e., a JIT inventory policy). In preparing the master budget for October, the firm recognized that several items on the standard cost sheet were expected to change. For example, the selling price of the product was expected to increase by 8%. Suppliers have notified the firm that starting October 1, materials prices would be 5% higher. The labor contract prescribes a 10% increase, starting October 1, on wages and benefits. Fixed manufacturing costs were expected to increase $5,000 for insurance, property taxes, and salaries. Fixed selling and administrative costs were expected to increase as follows: $2,000 in managers' salaries and $2,000 for advertising during October. The unit sales for October were expected to be 11,000 units. Solid Box Fabrications uses a JIT approach in all of its operations, including materials acquisitions and product manufacturing Part 1 Required: 1. Prepare the master (static) budget and pro forma budgets for 10,000 units and 11,500 units for October 2. Calculate and label as favorable or unfavorable the master (static) budget variance (total operating Income variance) for October Break this variance down into the sales volume variance and the total flexible-budget variance for the period. 3. Compute and label as favorable or unfavorable each of the following variances for October selling price variance, total variable cost flexible-budget (FB) variance, and total fixed cost variance. 4. Break down the total direct materials flexible-budget variance and the total direct labor flexible-budget variance into their price (rate) and quantity (efficiency) components. Label each component variance as favorable or unfavorable. Required 1 Required 2 Required 3 Required 4 Prepare the master (static) budget and pro forma budgets for 10,000 units and 11,500 units for October intermediate calculations. Round your answers to the nearest whole dollar.) Master (Static) Budget Pro Forma Budgets Units Sales $ Variable costs: Direct materials Direct labor Manufacturing overhead Selling and administrative Total variable costs Contribution margin Fixed costs: Manufacturing Selling and administrative Total fixed costs Operating income o $ $ OO $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 0 $ 0 Required Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate and label as favorable or unfavorable the master (static) budget variance (total opera October. Break this variance down into the sales volume variance and the total flexible-budget not round intermediate calculations. Round your answers to the nearest whole dollar. Indicate to "Favorable", "Unfavorable" or "None" for no effect (i.e., zero variance).) Total master (static) budget variance Sales volume variance, in terms of operating income Total flexible-budget variance Required 1 Required 2 Required 3 Required 4 Compute and label as favorable or unfavorable each of the following variances for October: selling price variable cost flexible-budget (FB) variance, and total fixed cost variance. (Do not round intermediate ca your answers to the nearest whole dollar. If a variance has no amount, select "None" in the correspond Indicate the effect of each variance "Favorable", "Unfavorable" or "None" for no effect (i.e., zero varian Selling price variance Total variable cost flexible-budget (FB) variance Total fixed cost variance