In: Accounting
RTI Company’s master budget calls for production and sale of 19,300 units for $98,430; variable costs of $44,390; and fixed costs of $18,600. During the most recent period, the company incurred $33,300 of variable costs to produce and sell 18,600 units for $86,300. During this same period, the company earned $26,300 of operating income. (Do not round intermediate calculations. Round final answer to the nearest whole dollar.)
Required: |
1. |
Determine the following for RTI Company: |
a. |
Flexible-budget operating income. |
b. |
Flexible-budget variance, in terms of contribution margin. |
c. |
Flexible-budget variance, in terms of operating income. |
d. |
Sales volume variance, in terms of contribution margin. |
e. |
Sales volume variance, in terms of operating income. |
Sales per unit | = | $98430/19300 units | = | $ 5.10 | ||||
Variable cost per unit | = | $44390/19300 units | = | $ 2.30 | ||||
Contribution margin per unit | = | $ 2.80 | ||||||
a. | Flexible - Budget Operating Income | = | $ 33,480 | |||||
Number of units | = | 18600 | ||||||
Sales | = | $5.10 X 18600 units | = | $ 94,860 | ||||
Less: | Variable cost | = | $2.30 X 18600 units | = | $ 42,780 | |||
Contribution margin | = | = | $ 52,080 | |||||
Less: | Fixed cost | = | = | $ 18,600 | ||||
Flexible - Budget Operating Income | = | = | $ 33,480 | |||||
b. | Flexible - Budget Variance in terms of contribution margin | = | 920 | Favorable | ||||
c. | Flexible - Budget Variance in terms of Operating Income margin | = | 7,180 | Unfavorable | ||||
d. | Sales Volume Variance in terms of contribution margin | = | 1,960 | Unfavorable | ||||
e. | Sales Volume Variance in terms of Operating Income margin | = | 1,960 | Unfavorable | ||||
Actual results | Flexible - Budget Variance | Flexible Budget | Sales Volume Variance | Planning Budget | ||||
Sales | $ 86,300 | $ 94,860 | $ 98,430 | |||||
Variable cost | $ 33,300 | $ 42,780 | $ 44,390 | |||||
Contribution margin | $ 53,000 | 920 | Favorable | $ 52,080 | 1,960 | Unfavorable | $ 54,040 | |
Fixed cost | $ 26,700 | $ 18,600 | $ 18,600 | |||||
Operating Income | $ 26,300 | 7,180 | Unfavorable | $ 33,480 | 1,960 | Unfavorable | $ 35,440 |