Alex is the controller of Joos Industries. After careful review of the budgeted income statements, and...

 

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Alex is the controller of Joos Industries. After careful review of the budgeted income statements, and after discussions with the sales and production managers, Alex determined that the best alternative is to base the master budget on a sales volume of 45,000 units and a sales price of $45 per unit. At the end of the year, the company had the following income statement, which was based on 41,000 actual units. Requirement A: Complete the Flexible Budget in the table below and identify if the flexible budget variance is favorable or unfavorable. AQXSP SQ SP MASTER BUDGET 45,000 UNITS 2,025,000 600,000 450,000 DESCRIPTION Sales Direct Materials Direct Labor Variable Overhead Fixed Overhead Rent- Fixed Insurance - Fixed Advertising - Fixed Operating Income ACTUAL 41,000 UNITS FLEXIBLE BUDGET 1,804,000 1845.000 550,000 546667 425,000 46.000 350,000 314333 200,000 70,000 15,000 50,000 144,000 $175,500 FLEXIBLE BUDGET VARIANCE 18000 FLEXIBLE BUDGET VARIANCE FOR U 345,000 235,000 75,000 20,000 48,000 252,000 Requirement B: The direct materials purchased were $200 per unit while the standard price for direct materials is $180. The total direct material used was 1,000 units while the standard direct materials allowed for actual production is 980 units. 1) identify if the variances below will be favorable or unfavorable and 2) what might be a cause for these variances Alex is the controller of Joos Industries. After careful review of the budgeted income statements, and after discussions with the sales and production managers, Alex determined that the best alternative is to base the master budget on a sales volume of 45,000 units and a sales price of $45 per unit. At the end of the year, the company had the following income statement, which was based on 41,000 actual units. Requirement A: Complete the Flexible Budget in the table below and identify if the flexible budget variance is favorable or unfavorable. AQXSP SQ SP MASTER BUDGET 45,000 UNITS 2,025,000 600,000 450,000 DESCRIPTION Sales Direct Materials Direct Labor Variable Overhead Fixed Overhead Rent- Fixed Insurance - Fixed Advertising - Fixed Operating Income ACTUAL 41,000 UNITS FLEXIBLE BUDGET 1,804,000 1845.000 550,000 546667 425,000 46.000 350,000 314333 200,000 70,000 15,000 50,000 144,000 $175,500 FLEXIBLE BUDGET VARIANCE 18000 FLEXIBLE BUDGET VARIANCE FOR U 345,000 235,000 75,000 20,000 48,000 252,000 Requirement B: The direct materials purchased were $200 per unit while the standard price for direct materials is $180. The total direct material used was 1,000 units while the standard direct materials allowed for actual production is 980 units. 1) identify if the variances below will be favorable or unfavorable and 2) what might be a cause for these variances