Adarmes Adventures manufactures aluminum canoes. In planning for the coming year

Question

Adarmes Adventures manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and 3,500 canoes. Canoes sell for $804 each. The standard variable cost information for a canoe is as follows.

Annual fixed overhead cost is expected to be:

Alexis King chose to prepare a static budget based on sales of 3,000 canoes. Actual sales were 3,100 canoes at a price of $854 each. The company incurred the following costs for the year:

Prepare a performance report for the year that shows the flexible budget and sales volume variances. (If operating income is negative, enter amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Direct materials $ 334 Direct labor 154 Variable overhead   Utilities 35   Indirect material 30   Indirect labor 60 Total $ 613

Explanation / Answer

Actual flexiblle budget variance flexible budget SVV StaticBudget

units sales 3100*854 3100*804 80400F 3000*804

2647400 155000F 2492400 2412000

Direct material 1013600 3100*334 3000*334

21800F 1035400 1002000

direct labour 452300 25100F 3100*154 3000*154

477400 462000

varaible overhead 398400 -10900U 3100* (35+30+60) 3100* (35+30+60)

   387500 375000   

contribution 783100 191000F 592100 573000

fixed overhead 117980 -7900U 110080 110080

Net income 665120 183100F 482020 462920

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