Adams Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price $ 36.90 Materials cost 9.00 Labor cost 4.50 Overhead cost 5.50 Selling, general, and administrative costs 7.00 Planned fixed costs Manufacturing overhead $ 133,000 Selling, general, and administrative 45,000 Adams planned to make and sell 22,000 copies of the book. Required: a-d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements assuming production volumes of 21,000 and 23,000 units. Determine the sales and variable cost volume variances assuming the volume is actually 23,000 units. Indicate whether the variances are favorable (U) select "None" if there is no effect (i.e zero variance) Master budget Flexible budgets Flexible budgets Volume variances Number of units 22,000 23,000 sales revenue Variable manufacturing costs variable selling general and admin labor manufacturing overhead fixed selling general and admin cost contribution margin Fixed costs sales revenue variable selling general and adm cost net income

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PA: The following product costs are available for Arrez Company on the production of DVD cases: direct...

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


Standard price and variable costs
Sales price	$	36.90
Materials cost		9.00
Labor cost		4.50
Overhead cost		5.50
Selling, general, and administrative costs		7.00
Planned fixed costs
Manufacturing overhead	$	133,000
Selling, general, and administrative		45,000

Adams planned to make and sell 22,000 copies of the book.

Required:

a-d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements assuming production volumes of 21,000 and 23,000 units. Determine the sales and variable cost volume variances assuming the volume is actually 23,000 units. Indicate whether the variances are favorable (U) select "None" if there is no effect (i.e zero variance)

	Master budget	Flexible budgets	Flexible budgets	Volume variances
Number of units		22,000	23,000
sales revenue
Variable manufacturing costs
variable selling general and admin
labor
manufacturing overhead
fixed selling general and admin cost
contribution margin
Fixed costs
sales revenue
variable selling general and adm cost
net income

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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