Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017
Sales				$	3,200,000
Cost of goods sold
Direct materials	$	880,000
Direct labor		160,000
Machinery repairs (variable cost)		48,000
Depreciation—Plant equipment (straight-line)		315,000
Utilities ($32,000 is variable)		182,000
Plant management salaries		230,000			1,815,000
Gross profit					1,385,000
Selling expenses
Packaging		64,000
Shipping		96,000
Sales salary (fixed annual amount)		250,000			410,000
General and administrative expenses
Advertising expense		126,000
Salaries		241,000
Entertainment expense		100,000			467,000
Income from operations				$	508,000

Phoenix Company’s actual income statement for 2017 follows.

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017
Sales (19,000 units)				$	3,878,000
Cost of goods sold
Direct materials	$	1,061,000
Direct labor		199,000
Machinery repairs (variable cost)		49,000
Depreciation—Plant equipment (straight-line)		315,000
Utilities (fixed cost is $147,500)		184,750
Plant management salaries		241,000			2,049,750
Gross profit					1,828,250
Selling expenses
Packaging		73,750
Shipping		106,500
Sales salary (annual)		268,000			448,250
General and administrative expenses
Advertising expense		134,000
Salaries		241,000
Entertainment expense		103,500			478,500
Income from operations				$	901,500

Required:
1. Prepare a flexible budget performance report for 2017.

PHOENIX COMPANY Flexible Budget Performance Report For Year Ended December 31, 2017 Flexible Budget Actual Results Variances Fav. / Unfav. Sales $3,200,000 $3,878,000 $678,000 Favorable Variable costs Direct materials 880,000 1,061,000 181,000 Direct labor 0 199,000 0 Machinery repairs 0 49,000 0 Utilities 0 0 0 Packaging 0 73,750 0 Shipping 0 106,500 0 Total variable costs 880,000 1,489,250 609,250 Contribution margin 0 0 Fixed costs Depreciation—Plant equipment (straight-line) 315,000 315,000 0 No variance Utilities 150,000 147,500 2,500 Favorable Plant management salaries 230,000 241,000 11,000 Unfavorable Sales salary 250,000 268,000 18,000 Unfavorable Advertising expense 126,000 134,000 8,000 Unfavorable Salaries 241,000 241,000 0 No variance Entertainment expense 100,000 103,500 3,500 Unfavorable Total fixed costs 1,412,000 1,450,000 38,000 Income from operations 0 $901,500

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Required information

[The following information applies to the questions displayed below.]

Alvarez Company’s output for the current period yields a $21,000 favorable overhead volume variance and a $61,800 unfavorable overhead controllable variance. Standard overhead applied to production for the period is $224,000.

Alvarez records standard costs in its accounts. Prepare the journal entry to charge overhead costs to the Work in Process Inventory account and to record any variances.

Journal entry worksheet

·        Record overhead applied to production and overhead variances.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit 1 Work in process inventory 224,000 Controllable variance 61,800 Volume variance 21,000 Factory overhead 264,800

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Farad, Inc., specializes in selling used SUVs. During the month, the dealership sold 50 trucks at an average price of $9,500 each. The budget for the month was to sell 46 trucks at an average price of $10,000 each. AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the dealership’s sales price variance and sales volume variance for the month

	Actual Sales -25000 Flexible Budget 40000 Budgeted Sales AQ x AP AQ x SP SQ x SP 50 x $9,500 50 x $10,000 46 x $10,000 $475,000 $500,000 $460,000 $25,000 15000 $40,000 Sales price variance 25,000 Favor or Unfavor Sales volume variance 40,000 Favor or Unfavor Total sales variance 0 Favor or Unfavor

Answer 1

Excel formulae sheet: