Question

The results for July for Brahms & Sons follow:  

Actual (based on actual sales of 100,000 units) Master Budget (based on budgeted sales 90,000 units)
Sales revenue $ 640,000 $ 765,000
Less
Variable costs
Direct material 100,000 76,500
Direct labor 95,000 135,000
Variable overhead 102,000 135,000
Marketing 18,400 22,500
Administrative 15,500 22,500
Total variable costs $ 330,900 $ 391,500
Contribution margin $ 309,100 $ 373,500
Less
Fixed costs
Manufacturing 138,300 132,000
Marketing 42,000 22,500
Administrative 98,800 96,000
Total fixed costs $ 279,100 $ 250,500
Operating profits $ 30,000 $ 123,000

Required:

Prepare a profit variance analysis for Brahms & Sons. ( 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

Profit variance analysis: Brahms & Sons.
	Actual (100,000 Units)	Manu-facturingVariance		Marketing &AdministrationVariance		Sales PriceVariance		FlexibleBudget (100,000Units)	SalesActivityVariance		MasterBudget (90,000Units)
Sales revenue	640,000					210,000	U	850000	85000	F	765000
Variable costs:
Manufacturing
Direct material	100000	15000	U					85000	8500	U	76500
Direct labor	95000	55000	F					150000	15000	U	135000
Variable Overhead	102000	48000	F					150000	15000	U	135000
Marketing	18400			6600	F			25000	2500	U	22500
Administration	15500			9500	F			25000	2500	U	22500
Contribution margin	309100	88000	F	16100	F	210000	U	415000	41500	F	373500
Fixed Costs
Manufacturing	138300	6300	U					132000	-		132000
Marketing	42000			19500	U			22500	-		22500
Administration	98800			2800	U			96000	-		96000
Operating profit	30000	81700	F	6200	U	210000	U	164500	41,500.00	F	123000
*765000/90000*100000=850000