Adams Publications established the following standard price and costs for a hard

Question

Adams Publications established the following standard price and costs for a hardcover picture book that the company produces.

Assume that Adams actually produced and sold 24,000 books. The actual sales price and costs incurred follow:

a. & b. Determine the flexible budget variances and also indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Standard price and variable costs Sales price $ 36.00 Materials cost 8.90 Labor cost 3.70 Overhead cost 6.10 Selling, general, and administrative costs 6.90 Planned fixed costs Manufacturing overhead $ 134,000 Selling, general, and administrative 48,000 Flexible Budget Variances Sales revenue Variable manufacturing costs Materials Labor Overhead Selling, general,and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general, and administrative costs Net income

Explanation / Answer

Working Flexible Budget Variance Flexible ($) Actual ($) Sales Revenue 36.00 *24,000 = 864,000 35.00 *24,000 = 840,000 24,000 U Variable manufcturing costs Materials 8.90 *24,000 = 213,600 9.10 *24,000 = 218,400 4,800 U Labour 3.70 *24,000 = 88,800 3.60 *24,000 = 86,400 2,400 F Overhead 6.10 *24,000 = 146,400 6.15 *24,000 = 147,600 1,200 U Selling, general, and administrative costs 6.90 *24,000 = 165,600 6.70*24,000 = 160,800 4,800 F Contribution Margin 249,600 226,800 22,800 U Fixed costs Manufacturing overhead 134,000 119,000 15,000 F Selling, general, and administrative costs 48,000 54,000 6,000 U Net Income 67,600 53,800 13,800 U

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