Keller Publications established the following standard price and costs for a har

Question

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

Assume that Keller actually produced and sold 40,000 books. The actual sales price and costs incurred follow:

Required

- Determine the flexible budget variances

Standard price and variable costs Sales price $ 36.10 Materials cost 8.60 Labor cost 3.80 Overhead cost 5.60 Selling, general, and administrative costs 7.00 Planned fixed costs Manufacturing overhead $ 127,000 Selling, general, and administrative 51,000

Explanation / Answer

Answer

The flexible budget variances:

Particulars Standard Actual Variances Sales 40000*36.10 =1444000 40000*35.10 =1404000 40000U Less:variable cost -Material cost 40000*8.60 =344000 40000*8.80   =352000 8000U -Labor 40000*3.80   =152000 40000*3.70   =148000 4000F -Overhead 40000*5.60 =224000 40000*5.65   =226000 2000U -Selling and administration 40000*7.00    =280000 40000*6.80 =272000 8000F Total vatiable cost 1000000 998000 2000F Contribution Margin 444000 406000 38000U Less:Fixed cost -Manufactuing overhead 127000 112000 15000F -Selling, general, and administrative 51000 57000 6000U Total fixed cost 178000 169000 9000F Income 266000 237000 29000U

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