Question

Snider Company manufactures floor lamps. Some of the company's data was misplaced. Use the following information to replace the lost data and document if the variance is favorable or unfavorable when required.

	Actual Results	Flexible Budget Variances	Flexible Budget	Sales-Volume Variances	Static Budget
Units sold	490,000		490,000		448,350
Revenues	$187,250	$5,000 F	(18)	$6,260 U	(19)
Variable costs	(20)	$890 U	$71,260	$10,800 F	$82,060
Fixed costs	$36,670	$3,740 F	$40,410	0	$40,410
Operating income	$78,430	(21)	$70,580	(22)	$66,040

a) What is the flexible budget variance?

b) What are the static budget revenues?

c) What are the variable costs for the actual budget?

d) What is the flexible budget operating income variance? Favorable/ Unfavorable?

e) What are the sales-volume variance in operating income? Favorable/ Unfavorable?

f) What is the total static-budget variance? Favorable/ Unfavorable?

Answer 1

a )If the revenue variance is favorable

actual revenue> flexible revenue

Flexible budget Revenue = Actual revenue-flexible revenue variance

=$187,250-$5,000

=$182,250

b)if revenue variance is unfavorable

flexible revenue< static revenue

static revenue = flexible revenue+saes volume revenue variance

=$182,250+$6,260

=$188,510

c)if variable cost variance is unfavorable

actual variable cost> flexible variable cost

actual variable cost = flexible cost+variable cost variance

=$71,260+$890

=$72,150

d)flexible budget operating income variance = actual operating income-flexible operating income

=$78,430-$70,580

=$7,850 favorable(as the actual operating income> flexible income the variance is favorable]

e) sale volume operating income variance= flexible operating income-static operating income

=$70,580-$66,040

=$4,540 favorable (flexible income> static income so variance is favorable)

f)total statice budget variance = actual income-static income

=$78,430-$66,040

=$12,390 Favorable