Lloyd Publications established the following standard price and costs for a hard

Question

Lloyd Publications established the following standard price and costs for a hardcover picture book that the company produces Standard price and variable costs Sales price Materials cost Labor cost Overhead cost $ 36.10 8.30 4.40 5.60 Selling, general, and administrative costs 6.30 Planned fixed costs Manufacturing overhead Selling, general, and administrative $134,000 46,000 Lloyd planned to make and sell 24,000 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 23,000 and 25,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 25 whether the variances are favorable (F) or unfavorable (U). (Select 'None" if there is n ,000 units. Indicate whether the variances are favorable (F) or unfavorable (U) (Select "None" if there is no effect (i.e., zero variance).) Master Budget Flexible Budgets Volume Variances 24,000 23,000 25,000 Number of units Variable manufacturing costs

Explanation / Answer

Sales volume variances:

= (Actual units sold – Budgeted units sold) * Budgeted Price per unit

= (25,000 – 24,000) * $36.10

=$36,100 (F)

Variable & Fixed cost volume variances:

= [(Budgeted fixed overhead / Budgeted production) * Units produced] – Budgeted fixed overhead

= [($180,000 / 24,000)* 25,000] - $180,000

=$7,500 (F)

Details Master budget Flexible budget Volume variances Number of units 24000 units 23000 units 25000 units Per unit cost Total cost Per unit cost Total cost Per unit cost Total cost Variable manufacturing cost: Sales price $                36.10 $           866,400 $                  36.10 $             830,300 $                  36.10 $             902,500 Material cost $                  8.30 $           199,200 $                    8.30 $             190,900 $                    8.30 $             207,500 Labor cost $                  4.40 $           105,600 $                    4.40 $             101,200 $                    4.40 $             110,000 Overhead cost $                  5.60 $           134,400 $                    5.60 $             128,800 $                    5.60 $             140,000 Selling, general, and administrative costs $                  6.30 $           151,200 $                    6.30 $             144,900 $                    6.30 $             157,500 Fixed cost: Manufacturing overhead $           134,000 $             134,000 $             134,000 Selling, general, and administrative costs $             46,000 $                46,000 $                46,000 Total cost $           770,400 $             745,800 $             795,000 Profit $             96,000 $                84,500 $             107,500

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