Answered: Vernon Publications established the…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 12PA: ABC Inc. spent a total of $48,000 on factory overhead. Of this, $28,000 was fixed overhead. ABC Inc....

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Question

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


Standard price and variable costs
Sales price	$	36.30
Materials cost		8.30
Labor cost		4.00
Overhead cost		5.40
Selling, general, and administrative costs		6.80
Planned fixed costs
Manufacturing overhead	$	130,000
Selling, general, and administrative		46,000

Vernon planned to make and sell 39,000 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 38,000 and 40,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 40,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Number of units
Sales revenue
Variable manufacturing costs
Fixed costs
Manufacturing overhead
Variable selling general, and administrative costs
Net income
X Answer is not complete.
Master
Budget
$
39,000
0
S
Flexible Budgets
38,000
0
0
S
40,000
0
0
Volume Variances

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