Question
In: Accounting
As the new accountant for Cohen & Co., you have been asked to provide a succinct...
As the new accountant for Cohen & Co., you have been asked to provide a succinct analysis of financial performance for the year just ended. You obtain the following information that pertains to the company’s sole product:
| Actual | Master (Static) Budget | ||||||||
| Units sold | 35,000 | 40,000 | |||||||
| Sales | $ | 384,000 | $ | 470,000 | |||||
| Variable costs | 214,000 | 278,000 | |||||||
| Fixed costs | 137,000 | 135,000 | |||||||
Required:
1. What was the actual operating income for the period?
2. What was the company’s master (static) budget operating income for the period?
3. (a) What was the total master (static) budget variance, in terms of operating income, for the period? (b) Is this variance favorable (F) or unfavorable (U)? (Note: The total master (static) budget variance is also referred to as the total operating income variance for the period.) (If a variance has no amount, select "None" in the corresponding dropdown cell.)
4. The total master (static) budget variance for a period can be decomposed into a total flexible-budget variance and a sales volume variance. (a) What was the total flexible-budget variance for the period? (b) Was this variance favorable (F) or unfavorable (U)? (c) What was the sales volume variance for the period? (d) Was this variance favorable (F) or unfavorable (U)? (Do not round your intermediate calculations. If a variance has no amount, select "None" in the corresponding dropdown cell.)
Solutions
Expert Solution
1. Actual operating income for the period is $33,000:
| Actual | |
| Units sold | 35,000 |
| Sales | 384,000 |
| Variable costs | 214,000 |
| Contribution Margin | 170,000 |
| Fixed costs | 137,000 |
| Operating Income | 33,000 |
2. Company’s master (static) budget operating income for the period is $57,000:
| Master (Static) Budget | |
| Units sold | 40,000 |
| Sales | 470,000 |
| Variable costs | 278,000 |
| Contribution Margin | 192,000 |
| Fixed costs | 135,000 |
| Operating Income | 57,000 |
3. Total master static budget variance is $24,000
| Actual | Master (Static) Budget | Master (static) budget variance | ||
| Units sold | 35,000 | 40,000 | ||
| Sales | 384,000 | 470,000 | ||
| Variable costs | 214,000 | 278,000 | ||
| Contribution Margin | 170,000 | 192,000 | ||
| Fixed costs | 137,000 | 135,000 | ||
| Operating Income | 33,000 | 57,000 | 24,000 | Unfavourable |
4.
| Actual | Master (Static) Budget | Master (static) budget variance | Flexible Budget | Flexible Budget Variance | Sales Volume variance | ||||
| A | B | A-B | C | C-A | B-C | ||||
| Units sold | 35,000 | 40,000 | 35,000 | 0 | 40,000 | ||||
| Sales | 384,000 | 470,000 | 411250 | 27,250 | U | 58,750 | U | ||
| Variable costs | 214,000 | 278,000 | 243250 | 29,250 | F | 34,750 | F | ||
| Contribution Margin | 170,000 | 192,000 | 168000 | -2,000 | F | 24,000 | U | ||
| Fixed costs | 137,000 | 135,000 | 135,000 | -2,000 | U | 0 | None | ||
| Operating Income | 33,000 | 57,000 | 24,000 | Unfavourable | 33,000 | 0 | None | 24,000 | U |
ekkarill92 answered 2 years agoRelated Solutions
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As the new accountant for Cohen & Co., you have been asked
to provide a succinct analysis of financial performance for the
year just ended. You obtain the following information that pertains
to the company’s sole product:
Master (Static
Actual
Budget
Units sold
35,000
40,000
Sales
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$375,000
Variable costs
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Fixed costs
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Required:
1. What was the actual operating income for the period?
2. What was the company’s master budget operating income for the
period?
3....
As the new accountant for Cohen & Co., you have been asked to provide a succinct...
As the new accountant for Cohen & Co., you have been asked
to provide a succinct analysis of financial performance for the
year just ended. You obtain the following information that pertains
to the company’s sole product:
Actual
Master (Static) Budget
Units sold
35,000
40,000
Sales
$
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$
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Variable costs
224,000
272,000
Fixed costs
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