You have been called in as a consultant for Palo Inc., a manufacturer of shower

Question

You have been called in as a consultant for Palo Inc., a manufacturer of shower radios. Although Palo's management is very happy they reported $50,180 more in net income than over their planning budget, they want to know why net income was so much higher than they expected for the quarter. Information regarding the first quarter for Palo Inc. is as follows: Budget 10,000 Actual 9,500 JUnits 400,000 427,500 Sales Variable Expenses: Variable Cost of Goods Sold Variable Selling Expenses Total Variable Expenses $ $ 264,000 30,000 294,000 106,000 242,820 28,500 271,320 156, 180 Contribution Margin $ $ 50,000 Fixed Expenses: Manufacturing Overhead Selling and Administrative Total Fixed Expenses Net Operating income loss) 50,000 15,000 65,000 41,000 15,000 65,000 91,180 $ Palo Inc. uses a standard costing system and information regarding the standards and actuals are given below. Standards: Direct Materials Direct Labor Variable manufacturing overhead Total Standard variable Costs Quantity 3.0 pounds .5 hours .3 mach hrs Price/Rate $6.00 per pound $15.00 per hour $3.00 per hour Standard Cost $ 18.00 $ 7.50 $ 0.90 $ 26.40 Actuals: Quantity 2.7 pounds Direct Materials Direct Labor Variable manufacturing overhead Price/Rate $5.80 per pound $15.00 per hour $3.00 per hour .3 mach hrs Required: Prepare a bullet point memo, explaining to Palo's Management (who are not accountants) why actual net income was so much higher than budget. Your answer will be evaluated not only on the explanations but on the specific evidence you give to support your answer. (Quantify the impact in dollars and explain in layman's terms).

Explanation / Answer

2. Second thing is cost i.e variable cost

3. third thing is reduction in selling an distribution expenses due to reduction in sales unit i.e from 10000 units to 9500 units = 30000-28500 = 1500

Hence total difference in income is 27500+21500+1500 = 50180 Ans.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

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