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As the new accountant for Cohen & Co., you have been asked to provide a succinct...

As the new accountant for Cohen & Co., you have been asked to provide a succinct analysis of financial performance for the year just ended. You obtain the following information that pertains to the company’s sole product: Actual Master (Static) Budget Units sold 25,000 30,000 Sales $ 402,000 $ 456,000 Variable costs 232,000 276,000 Fixed costs 161,000 141,000 Required: 1. What was the actual operating income for the period? 2. What was the company’s master (static) budget operating income for the period? 3. (a) What was the total master (static) budget variance, in terms of operating income, for the period? (b) Is this variance favorable (F) or unfavorable (U)? (Note: The total master (static) budget variance is also referred to as the total operating income variance for the period.) (If a variance has no amount, select "None" in the corresponding dropdown cell.) 4. The total master (static) budget variance for a period can be decomposed into a total flexible-budget variance and a sales volume variance. (a) What was the total flexible-budget variance for the period? (b) Was this variance favorable (F) or unfavorable (U)? (c) What was the sales volume variance for the period? (d) Was this variance favorable (F) or unfavorable (U)? (Do not round your intermediate calculations. If a variance has no amount, select "None" in the corresponding dropdown cell.)

Solutions

Expert Solution

Master (Static Flexible
Actual Budget Budget
Units sold 25000 30000 25000
Sales $402,000.00 $456,000.00 $          380,000.00
Variable costs $232,000.00 $276,000.00 $          230,000.00
Fixed costs $161,000.00 $141,000.00 $          145,000.00
operating income $     9,000.00 $   39,000.00 $              5,000.00
1)actual operating income= $ 9000
2)master budget operating income= $ 39000
3)total static budget variance= $ 30000 favorable
4a)total flexible budget variance= 9000+5000 = $ 14000
(actual operating income-flexible operating income)
4b)sales volume variance= 5000-39000
                                                     =-34000 unfavorable
(flexible operating income-budgeted operating income)

ekkarill92 answered 6 months ago
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