Question

The master budget at Western Company last period called for sales of 225,100 units at $9.10 each. The costs were estimated to be $3.76 variable per unit and $225,100 fixed. During the period, actual production and actual sales were 230,100 units. The selling price was $9.20 per unit. Variable costs were $4.60 per unit. Actual fixed costs were $225,100.

Required:

Prepare a profit variance analysis. (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

Western Company
Profit variance Analysis
	Actual	Manufacturing Variances		Sales Price Variance		Flexible Budget	Sales Activity Variance		Master Budget
Selling units (q)	2,30,100					2,30,100			2,25,100
Selling price per unit (i)	$ 9.20					$ 9.10			$ 9.10
Variable cost per unit (ii)	$ 4.60					$ 3.76			$ 3.76
Sales Revenue (q x (i))	$       21,16,920			$          23,010	F	$20,93,910	$        45,500	F	$      20,48,410
Less Variable Expenses (q X (ii))	$       10,58,460	$   1,93,284	U			$   8,65,176	$        18,800	U	$         8,46,376
Contribution margin	$       10,58,460	$   1,93,284	U	$          23,010	F	$12,28,734	$        26,700	F	$      12,02,034
Less Fixed Expenses:	$          2,25,100	$                -	None			$   2,25,100	$                 -	None	$         2,25,100
Operating Profits	$          8,33,360	$   1,93,284	U	$          23,010	F	$10,03,634	$        26,700	F	$         9,76,934