The results for July for Brahms & Sons follow: Required: Prepare a profit varian

Question

The results for July for Brahms & Sons follow:  

Required:

Prepare a profit variance analysis for Brahms & Sons. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Actual (based on actual sales of 58,800 units) Master Budget (based on budgeted sales of 56,000 units) Sales revenue $ 462,000 $ 480,000 Less Variable costs Direct material 58,800 48,000 Direct labor 54,600 64,000 Variable overhead 63,400 64,000 Marketing 20,400 20,000 Administrative 18,800 20,000 Total variable costs $ 216,000 $ 216,000 Contribution margin $ 246,000 $ 264,000 Less Fixed costs Manufacturing 102,400 100,000 Marketing 22,800 20,000 Administrative 81,200 80,000 Total fixed costs $ 206,400 $ 200,000 Operating profits $ 39,600 $ 64,000

Explanation / Answer

Profit variance analysis for Brahms & Sons is as prepared below:

Working:

Brahms and Sons Profit Variance Analysis Actual Manufacturing Variances Marketing and Administrative Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget A B C A-B A-B A-B B-C Sales revenue $ 462,000 $ -42,000 U 504000 $ 24,000 F $ 480,000 Variable costs: Materials 58,800 8,400 U 50400 $ 2,400 U 48,000 Direct labor 54,600 -12,600 F 67200 $ 3,200 U 64,000 Variable overhead 63,400 -3,800 F 67200 $ 3,200 U 64,000 Marketing 20,400 -600 F 21000 $ 1,000 U 20,000 Administrative 18,800 -2,200 F 21000 $ 1,000 U 20,000 Total variable costs $ 216,000 -10,200 F -600 F $ 226,800 $ 10,800 U $ 216,000 Contribution margin $ 246,000 -10,200 F -600 F $ -42,000 U $ 277,200 $ 13,200 U $ 264,000 Fixed costs: Manufacturing overhead 102,400 2,400 U 100000 $ 0 None 100,000 Marketing 22,800 2,800 U 20000 $ 0 None 20,000 Administrative 81,200 1,200 U 80000 $ 0 None 80,000 Total fixed costs $ 206,400 3,600 U 2,800 U $ 200,000 $ 0 None $ 200,000 Operating profits $ 39,600 -6,600 F 2,200 U $ -42,000 U $ 77,200 $ 13,200 F $ 64,000

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