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 460,000 units)						Master Budget (based on budgeted orders for 500,000 units)
Sales revenue		$	4,978,000					$	5,000,000
Less
Variable costs
Materials			1,490,000						1,500,000
Direct labor			286,000						350,000
Variable overhead			675,400						650,000
Variable marketing and administrative			488,000						500,000
Total variable costs		$	2,939,400					$	3,000,000
Contribution margin		$	2,038,600					$	2,000,000
Less
Fixed costs
Manufacturing overhead			990,800						961,000
Marketing			298,000						298,000
Administrative			214,000						181,000
Total fixed costs		$	1,502,800					$	1,440,000
Operating profits		$	535,800					$	560,000

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.)

Answer 1