E7-25 (Slal t0) Amerfond, Inc. produces the basic fillings used in many popular
ID: 2550175 • Letter: E
Question
E7-25 (Slal t0) Amerfond, Inc. produces the basic fillings used in many popular frozen desserts and treats-vanilla and costing and carries over no inventory from one month to the next. The ice-cream product group's results EE(Click the icon to view the results.) Read the requirements Begin with the flexible budget columns, then enter in the sales volume variance and static budget variand Label each variance as favorable (F) or unfavorable (U). (For variances with a $O balance, make sure to dollar amounts to the nearest whole dollar and percentages to two decimal places, X.XX%.) Flexible- Actual Budget Flexible Results Variances Budget Units (pounds) 560001- Revenues 2928800 Variable mfg. Contribution margin! 1097600 varate nfo costs 1891200 1831200 Choose from any list or enter any number in the input fields and then click Check Answer. Clear All G Search or type URL 3 4 5 6 8Explanation / Answer
1. Amerfond Inc.
Performance Report, 2017
2. Static Budget Variance : $ 49,000 U
Sales Volume Variance : $ 29,400 F
Flexible Budget Variance : $ 78,400 U
3. Budgeted selling price per pound = $ 2,893,800 / 546,000 pounds = $ 5.30 per pound.
Actual selling price per pound = $ 2,928,800 / 560,000 pounds = $ 5.23 per pound.
Selling price variance = Actual Units Sold ( Actual Selling Price per Unit - Budgeted Selling Price per Unit) = 560,000 x $ ( 5.23 - 5.30) = $ 39,200 U.
4. Yes, John Halper should be more concerned because of the following three reasons:
a. Variable manufacturing costs are overbudget by 4.81 %, and variable costs are to a large extent uncontrollable unless there are manifacturing inefficiencies. Is it possible that direct materials are being purchased at too high a price ? Is it necessary to look at the labor mix to check whether the company is paying too much, or is using an inefficient labor force? Is it possible that the cost drivers used for allocating manufacturing overheads are inappropriate?
b. Though the volume of sales is higher than the budgeted numbers, the sales price is below expected of $ 5.30 per unit, which causes a $ 39,200 U selling price variance eating into the contribution margin of the company.
c. The results of the above is that contribution margin is 9.40% lower than budgeted.
Actuals Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget Static Budget Variance Static Budget Variance as % of Static Budget Units ( Pounds) 560,000 0 560,000 14,000 F 546,000 14,000 F 2.56 % Revenue $ 2,928,800 $ 39,200 U $ 2,968,000 $ 74,200 F $ 2,893,800 35,000 F 1.21 % Variable Manufacturing Costs 1,831,200 $ 39,200 U 1,792,000 $ 44,800 U 1,747,200 $ 84,000 U 4.81 % Contribution Margin $ 1,097,600 78,400 U 1,176,000 29,400 F 1,146,600 49,000 U 9.40 %Related Questions
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