SP21 - $9,000 F Correct Correct Correct Part 2 Analyze and...

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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 21-04A PHOENIX COMPANY Flexible Budget Performance Report For Year Ended December 31, 2013 Flexible Actual Budget Results Variances Sales $3,600,000 $3,648,000 $48,000 F Variable costs: Direct materials 1,170,000 1,185,000 15,000 U Direct labor 270,000 278,000 8,000 U Machinery repairs 72,000 63,000 9,000 F Utilities 54,000 53,000 1,000 F Packaging 90,000 87,500 2,500 F Shipping 126,000 118,500 7,500 F Total variable costs 1,782,000 1,785,000 3,000 U Contribution margin 1,818,000 1,863,000 45,000 F Fixed costs: Depreciation - plant equipment 300,000 300,000 - Utilities 150,000 147,500 2,500 F Plant management salaries 200,000 210,000 10,000 U Sales salary 250,000 268,000 18,000 U Advertising expense 125,000 132,000 7,000 U Salaries 241,000 241,000 - Entertainment expense 90,000 93,500 3,500 U Total fixed costs 1,356,000 1,392,000 36,000 U Income from operations $462,000 $471,000
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Unformatted text preview: $9,000 F Correct! Correct! Correct! Part 2: Analyze and interpret both the (a) sales variance and (b) direct materials variance. (a) Analysis of sales variance: Total Per unit Budgeted sales $3,600,000 $200.00 Actual sales 3,648,000 202.67 Sales variance $48,000 $2.67 Correct! Correct! Interpretation: The sales variance is favorable because the actual price was higher than planned. (b) Analysis of direct materials variance: Total Per unit Budgeted materials $1,170,000 $65.00 Actual materials used 1,185,000 65.83 Direct materials variance $15,000 $0.83 Correct! Correct! Interpretation: The direct materials variance is unfavorable for two possible reasons. (1) The quantity of materials used may have been more than the quantity budgeted, and/or (2) the amount paid for the materials might have been more than the budgeted purchase price....
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