Question

Problem 16-55 Profit Variance Analysis (LO 16-4)

The results for July for Brahms & Sons follow:  

	Actual (based on actual sales of 98,000 units)						Master Budget (based on budgeted sales 96,000 units)
Sales revenue		$	650,000					$	816,000
Less
Variable costs
Direct material			98,000						81,600
Direct labor			98,000						144,000
Variable overhead			105,000						144,000
Marketing			20,800						24,000
Administrative			15,800						24,000
Total variable costs		$	337,600					$	417,600
Contribution margin		$	312,400					$	398,400
Less
Fixed costs
Manufacturing			138,100						138,000
Marketing			43,800						24,000
Administrative			102,100						99,000
Total fixed costs		$	284,000					$	261,000
Operating profits		$	28,400					$	137,400

Required:

Prepare a profit variance analysis for Brahms & Sons. ( Do not round intermediate calculations. 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.)

BRAHMS & SONS Profit Variance Analysis Actual (98,000 units) Manufacturing Variance Marketing & Administration Variance Sales Price Variance Flexible Budget (units) Sales Activity Variance Master Budget (96,000 units) Sales revenue $650,000 $816,000 Variable costs: Manufacturing Direct material 98,000 81,600 Direct labor 98,000 144,000 Overhead 105,000 144,000 Marketing 20,800 24,000 Administration 15,800 24,000 Contribution margin $312,400 $398,400 Fixed costs: Manufacturing 138,100 138,000 Marketing 43,800 24,000 Administration 102,100 99,000 Operating profit $28,400 $137,400

Answer 1

1

BRAHMS & SONS
Profit Variance Analysis
	Actual (98,000 units)	Manufacturing Variance		Marketing & Administration Variance		Sales Price Variance		Flexible Budget (units)	Sales Activity Variance		Master Budget (96,000 units)
Sales revenue	$650,000					$183,000	U	$833,000	$17,000	F	$816,000
Variable costs:
Manufacturing
Direct material	98,000	$14,700	U					$83,300	1,700	U	81,600
Direct labor	98,000	49,000	F					$147,000	3,000	U	144,000
Overhead	105,000	42,000	F					$147,000	3,000	U	144,000
Marketing	20,800			3,700	F			$24,500	500	U	24,000
Administration	15,800			8,700	F			$24,500	500	U	24,000
Contribution margin	$312,400	$76,300	F	12,400	F	$183,000	U	$406,700	$8,300	F	$398,400
Fixed costs:
Manufacturing	138,100	100	U					138,000	0		138,000
Marketing	43,800			19,800	U			24,000	0		24,000
Administration	102,100			3,100	U			99,000	0		99,000
Operating profit	$28,400	76,200	F	10,500	U	$183,000	U	145,700	8,300	F	137,400

Working notes for the above answer is as under