Question

In: Accounting

RTI Company’s master budget calls for production and sale of 19,300 units for $98,430; variable costs...

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.

Solutions

Expert Solution

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

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