Question

Benson Publications established the following standard price and costs for a hardcover picture book that the company produces.

Standard price and variable costs
Sales price	$	36.20
Materials cost		8.60
Labor cost		3.50
Overhead cost		5.90
Selling, general, and administrative costs		6.40
Planned fixed costs
Manufacturing overhead	$	134,000
Selling, general, and administrative		54,000

Benson planned to make and sell 35,000 copies of the book.

Required:

a. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 34,000 and 36,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 36,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Master Budget	Flexible Budgets		Volume Variances
Number of units	35,000	34,000	36,000
Sales revenue
Variable manufacturing costs
Materials
Labor
Manufacturing overhead		not attempted	not attempted	not attempted	not attempted
Variable selling general, and administrative costs			not attempted	not attempted	not attempted
Contribution margin	0	0	0	not attempted	not attempted
Fixed costs
Manufacturing overhead
Fixed selling, general, and administrative costs		not attempted	not attempted	not attempted	not attempted
Net income	$0	$0	$0	not attempted

Answer 1