Kevin Jarvis is the controller of Bitterroot Industries. Kevin prepared the foll

Question

Kevin Jarvis is the controller of Bitterroot Industries. Kevin prepared the following budgeted income statement at various levels of sales. After careful review of the budgeted income statements, and after discussions with the sales and production managers, the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.

$89,000

$209,000

$329,000

Actual results for the year were 28,000 units, reflected in the following income statement:

$163,300

What is the sales volume variance for direct material?

20,000 30,000 40,000 Sales $1,240,000 $1,860,000 $2,480,000 Variable costs Direct material 340,000 510,000 680,000 Direct labor 300,000 450,000 600,000 Overhead 360,000 540,000 720,000 Total variable costs 1,000,000 1,500,000 2,000,000 Contribution margin 240,000 360,000 480,000 Fixed costs Overhead 62,000 62,000 62,000 Rent 46,000 46,000 46,000 Insurance 28,000 28,000 28,000 Advertising 15,000 15,000 15,000 Total fixed costs 151,000 151,000 151,000 Operating income

$89,000

$209,000

$329,000

Explanation / Answer

Direct material per unit= 340,000/20000

                                        =17

Sales Volume Variance for direct material:

(Actual Unit Sold - Budgeted Unit Sales) x = Standard Contribution Per Unit

=(28,000-30,000)*17

=-34,000

=34,000 fav

Direct material per unit= 340,000/20000

                                        =17

Sales Volume Variance for direct material:

(Actual Unit Sold - Budgeted Unit Sales) x = Standard Contribution Per Unit

=(28,000-30,000)*17

=-34,000

=34,000 fav

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.