7-37 Comprehensive variance analysis review. Blauw vogel is a single-product com

Question

7-37 Comprehensive variance analysis review. Blauw vogel is a single-product company that produces and sells product P. For the year 2014, the following budgeted absorp costs per product are: Material Variable costs Fixed costs s 2 S 6 $14 The variable selling costs are S2 per unit, and the fixed selling costs are $400,000 per year The normal production and sales are 100,000 units per year. The budgeted production for 20 units, the budgeted sales for 2014 are 80,000 units. During 2014, the selling price will be $25 per unit. On Dec. 31, 2014, the following actual data are given: 14 is 90,000 Production: 84,000 units Sales: 82,000 units Selling price: $24 per unit Purchase price of material: $3.50 per kg Use of material: 160,000 kg Variable costs of production department: $2 per unit Fixed costs of production department: $580.000 . Variable costs of selling department: $2.50 per unit Fixed selling costs: $400,000 1. Calculate the static budget variance for operating income. 2. Divide your answer to 1 into the flexible budget variance for operating income and the sales volume 3. 4. variance for operating income. Divide your answer to 2 into individual variances Divide your answer to 3 into subvariances, if applicable.

Explanation / Answer

1..Static Budget Flexible budget Actual Production 90000 84000 84000 Sales 80000 82000 82000 Selling price /unit 25 25 24 Total sales revenue 2000000 2050000 1968000 Less: Costs Raw materials used 480000 492000 560000 Variable costs of Prodn.Dept. 160000 164000 164000 Fixed costs of prodn. Dept. 480000 480000 580000 Gross Margin 880000 914000 664000 Less: Selling costs: Variable 160000 164000 205000 Fixed costs 400000 400000 400000 Operating Income 320000 350000 59000 Variance schedule 30000 (F) 2, ,3 & 4 Static Budget Flexible budget Sales Volume Production 90000 84000 84000 Sales 80000 82000 2000 Selling price /unit 25 25 25 Total sales revenue 2000000 2050000 50000 Less: Costs Raw materials used 480000 492000 12000 Variable costs of Prodn.Dept. 160000 164000 4000 Fixed costs of prodn. Dept. 480000 480000 0 Gross Margin 880000 914000 34000 Less: Selling costs: Variable 160000 164000 4000 Fixed costs 400000 400000 0 Operating Income 320000 350000 30000

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