Question

Franklin Publications established the following standard price and costs for a hardcover picture book that the company produces.

Standard price and variable costs
Sales price	$	36.10
Materials cost		8.50
Labor cost		4.10
Overhead cost		6.30
Selling, general, and administrative costs		6.90
Planned fixed costs
Manufacturing overhead	$	134,000
Selling, general, and administrative		48,000

Assume that Franklin actually produced and sold 33,000 books. The actual sales price and costs incurred follow:

Actual price and variable costs
Sales price	$	35.10
Materials cost		8.70
Labor cost		4.00
Overhead cost		6.35
Selling, general, and administrative costs		6.70
Actual fixed costs
Manufacturing overhead	$	119,000
Selling, general, and administrative		54,000

Required

a. & b. Determine the flexible budget variances and also indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Answer 1

Solution a & b:

Frankling Publications
Flexible Budget Variance
Particulars	Actual results	Flexible Budget Variance		Flexible Budget
Unit Sales	33000			33000
Sales Revenue	$1,158,300.00	$33,000.00	U	$1,191,300.00
Less: Variable Expenses:
Direct material	$287,100.00	$6,600.00	U	$280,500.00
Direct labor	$132,000.00	$3,300.00	F	$135,300.00
Variable overhead	$209,550.00	$1,650.00	U	$207,900.00
Selling , general and administrative cost	$221,100.00	$6,600.00	F	$227,700.00
Total variable expenses	$849,750.00	$1,650.00	F	$851,400.00
Contribution margin	$308,550.00	$31,350.00	U	$339,900.00
Less: Fixed expenses:
Manufacturing overhead	$119,000.00	$15,000.00	F	$134,000.00
Selling, general and administrative	$54,000.00	$6,000.00	U	$48,000.00
Total fixed expenses	$173,000.00	$9,000.00	F	$182,000.00
Operating Income	$135,550.00	$22,350.00	U	$157,900.00