Question

Calculation of budget variances

The accountant for Moon Industries has taken unexpected leave and has not completed the end-of-period budget analysis. The following incomplete budget analysis was found on her desk.

	Static budget	Variance	Flexible budget	Variance	Actual
	$	$	$	$	$
Sales (small)	1,500,000				1,920,000
Sales (large)	1,000,000				1,470,000
Total sales	2,500,000				3,390,000
Variable costs
Materials (small)	350,000				510,000
Labour (small)	200,000				270,000
Variable overhead (small)	30,000				35,400
Materials (large)	400,000				690,000
Labour (large)	200,000				330,000
Variable overhead (large)	50,000				74,600
Contribution margin	1,270,000				1,480,000
Fixed costs
Manufacturing overhead	120,000				180,000
Selling expenses	50,000				90,000
Admin expenses	30,000				25,000
Net profit	1,070,000				1,185,000

Additional information:

Per Unit	Small	Large
Selling price	$3,000	$10,000
Variable costs
Material	$700	$4,000
Labour	$400	$2,000
Variable overhead	$60	$500

Required

(a)     Complete the variance analysis report.

(b)     Provide a brief report to management of any issues highlighted from your analysis in (a).

Answer 1