Question

Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:

  

	Actual (based on actual orders for 463,000 units)						Master Budget (based on budgeted orders for 506,000 units)
Sales revenue		$	4,981,000					$	5,060,000
Less
Variable costs
Materials			1,505,000						1,518,000
Direct labor			289,000						354,200
Variable overhead			675,700						657,800
Variable marketing and administrative			494,000						506,000
Total variable costs		$	2,963,700					$	3,036,000
Contribution margin		$	2,017,300					$	2,024,000
Less
Fixed costs
Manufacturing overhead			991,400						961,300
Marketing			301,000						301,000
Administrative			217,000						181,300
Total fixed costs		$	1,509,400					$	1,443,600
Operating profits		$	507,900					$	580,400

Required:

Prepare a profit variance analysis for Osage, Inc., (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.)

OSAGE, INC. Profit Variance Analysis Actual Manufacturing Variances Marketing and Administrative Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget Sales revenue $4,981,000 $5,060,000 Variable costs: Materials 1,505,000 1,518,000 Direct labor 289,000 354,200 Variable overhead 675,700 657,800 Variable marketing and administrative 494,000 506,000 Total variable costs $2,963,700 $3,036,000 Contribution margin $2,017,300 $2,024,000 Fixed costs: Manufacturing overhead 991,400 961,300 Marketing 301,000 301,000 Administrative 217,000 181,300 Total fixed costs $1,509,400 $1,443,600 Operating profits $507,900 $580,400

Answer 1

OSAGE, INC.
Profit Variance Analysis
	Actual	Manufacturing Variances		Marketing and Administrative Variances		Sales Price Variance		Flexible Budget	Sales Activity Variance		Master Budget
Sales revenue	$4,981,000					351,000.00	F	4,630,000.00	430,000.00	U	5,060,000.00
Variable costs:
Materials	1,505,000	81,875.00	U					1,423,125.00	94,875.00	F	1,518,000
Direct labor	289,000	43,062.50	F					332,062.50	22,137.50	F	354,200
Variable overhead	675,700	59,012.50	U					616,687.50	41,112.50	F	657,800
Variable marketing and administrative	494,000			19,625.00	U			474,375.00	31,625.00	F	506,000
Total variable costs	$2,963,700	97,825.00	U	19,625.00	U			2,846,250.00	189,750.00	F	$3,036,000
Contribution margin	$2,017,300	97,825.00	U	19,625.00	U	351,000.00	F	1,783,750.00	240,250.00	U	$2,024,000
Fixed costs:
Manufacturing overhead	991,400	30,100	U					961,300	-		961,300
Marketing	301,000			0				301,000	-		301,000
Administrative	217,000			35,700	U			181,300	-		181,300
Total fixed costs	$1,509,400	30,100	U	35,700	U			1,443,600	-		$1,443,600
Operating profits	$507,900	127,925.00	0	55,325.00	U	351,000.00	F	340,150.00	240,250.00		$580,400