Osage, Inc., manufactures and sells lamps. The company produces only when it rec
ID: 2600101 • Letter: O
Question
Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:
Required:
Prepare a sales activity variance analysis for Osage, Inc., (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Actual (based on actual orders for 450,000 units) Master Budget (based on budgeted orders for 480,000 units) Sales revenue $ 4,974,000 $ 4,800,000 Less Variable costs Materials 1,536,000 1,536,000 Direct labor 251,000 312,000 Variable overhead 578,400 528,000 Variable marketing and administrative 371,000 384,000 Total variable costs $ 2,736,400 $ 2,760,000 Contribution margin $ 2,237,600 $ 2,040,000 Less Fixed costs Manufacturing overhead 653,400 625,000 Marketing 170,000 170,000 Administrative 124,500 102,500 Total fixed costs $ 947,900 $ 897,500 Operating profits $ 1,289,700 $ 1,142,500Explanation / Answer
Answer:
OSAGE INC.
Sales Activity Variance
Flexible
budget
Sales
activity variance
Master
budget
450,000
units
30,000
units
U
480,000
units
Sales revenue
4500000
300,000
U
4,800,000
Variable costs:
Materials
1440000
96,000
F
1,536,000
Direct labor
292500
19,500
F
312,000
Variable overhead
495000
33,000
F
528,000
Variable marketing and administrative
360000
24,000
F
384,000
Total variable costs
2587500
172,500
F
2,760,000
Contribution margin
1912500
127,500
U
2,040,000
Fixed costs:
Manufacturing overhead
625,000
0
625,000
Marketing
170,000
0
170,000
Administrative
102,500
0
102,500
Total fixed costs
897,500
0
897,500
Operating profits
1,015,000
127,500
U
1,142,500
OSAGE INC.
Sales Activity Variance
Flexible
budget
Sales
activity variance
Master
budget
450,000
units
30,000
units
U
480,000
units
Sales revenue
4500000
300,000
U
4,800,000
Variable costs:
Materials
1440000
96,000
F
1,536,000
Direct labor
292500
19,500
F
312,000
Variable overhead
495000
33,000
F
528,000
Variable marketing and administrative
360000
24,000
F
384,000
Total variable costs
2587500
172,500
F
2,760,000
Contribution margin
1912500
127,500
U
2,040,000
Fixed costs:
Manufacturing overhead
625,000
0
625,000
Marketing
170,000
0
170,000
Administrative
102,500
0
102,500
Total fixed costs
897,500
0
897,500
Operating profits
1,015,000
127,500
U
1,142,500
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