Question

A new accounting intern at Gibson Corporation lost the only copy of this period's master budget. The CFO wants to evaluate performance for this period but needs the master budget to do so. Actual results for the period follow:

  

Sales volume		240,000	units
Sales revenue	$	1,612,800
Variable costs
Manufacturing		354,816
Marketing and administrative		145,152
Contribution margin	$	1,112,832
Fixed costs
Manufacturing		469,600
Marketing and administrative		276,800
Operating profit	$	366,432

  

The company planned to produce and sell 204,000 units for $6.00 each. At that volume, the contribution margin would have been $856,800. Variable marketing and administrative costs are budgeted at 10 percent of sales revenue. Manufacturing fixed costs are estimated at $2.40 per unit at the normal volume of 204,000 units. Management notes, "We budget an operating profit of $1.00 per unit at the normal volume."

  

Required:

(a)	Construct the master budget for the period. (Do not round your intermediate calculations.Round your answers to the nearest dollar amount.)

(b)	Prepare a profit variance analysis like the one in Exhibit 16.5.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).Do not round your intermediate calculations. Round your answers to the nearest dollar amount.)

Answer 1