Question

Problem 16-46 Solve for Master Budget Given Actual Results (LO 16-2, 4)

A new accounting intern at Gibson Corporation lost the only copy of this period's master budget. The CFO wants to evaluate performance for this period but needs the master budget to do so. Actual results for the period follow:  
  

Sales volume		130,000	units
Sales revenue	$	873,600
Variable costs
Manufacturing		192,192
Marketing and administrative		78,624
Contribution margin	$	602,784
Fixed costs
Manufacturing		251,200
Marketing and administrative		146,000
Operating profit	$	205,584

  

The company planned to produce and sell 110,500 units for $6.00 each. At that volume, the contribution margin would have been $464,100. Variable marketing and administrative costs are budgeted at 10 percent of sales revenue. Manufacturing fixed costs are estimated at $2.40 per unit at the normal volume of 110,500 units. Management notes, "We budget an operating profit of $1.00 per unit at the normal volume."

  

Required:

a. Construct the master budget for the period. (Do not round intermediate calculations.)

	GIBSON CORPORATION Master Budget Sales volume units Sales revenue Variable costs: Manufacturing Marketing and administrative Contribution margin $0 Fixed costs: Manufacturing Marketing and administrative Operating profit $0

b. Prepare a profit variance analysis. (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.)

GIBSON CORPORATION Profit Variance Analysis Actual (130,000 Units) Manufacturing Variances Marketing and Administrative Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget Sales revenue $873,600 Variable costs: Manufacturing 192,192 Marketing and administrative 78,624 Contribution margin $602,784 Fixed costs: Manufacturing 251,200 Marketing and administrative 146,000 Operating profit $205,584

Answer 1

Part A

GIBSON CORPORATION

Master budget

Sales volume	110500	units
Sales revenue	663000	(110500*6)
Variable costs:
Manufacturing	132600	(663000-66300-464100)
Marketing and administrative	66300	10%*663000
Contribution margin	464100
Fixed cost :
Manufacturing	265200	(110500*2.40)
Marketing and administrative	88400	(464100-265200-110500)
Operating profit	110500	(110500*1)

Part B

GIBSON CORPORATION

Price variance analysis

F	Actual (130000 units)	manufacturing variance		Marketing and administrative variance		Sales variance		Flexible budget	sales activity variance
Sales revenue	873600					93600 (873600-780000)	F	780000 (130000*6)	117000 (780000-663000)	F
Variable cost :
Manufacturing	192192	36192	U					156000 (132600*(130000/110500))	23400	U
Marketing and administrative	78624			624 (78624-78000)	U			78000 (780000*10%)	11700 (78000-66300)	U
Contribution margin	602784	36192	U	624	U	93600	F	546000	81900 (546000-464100)	F
Fixed costs :
Manufacturing	251200	14000	F					265200
Marketing and administrative	146000			57600	U			88400
Operating income	205584	22192	U	58224	U	93600	F	192400	81900	F