Question

Performance Report, June 2017
	Actual	Static
	Results	Budget
Units (pounds)	390,000	380,000
Revenues	$2,203,500	$2,166,000
Variable manufacturing costs	1,423,500	1,368,000
Contribution margin	$780,000	$798,000

SteveSteve

AdlerAdler​,

the business manager for​ ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up.​Unfortunately, variable manufacturing costs went​ up, too. The bottom line is that contribution margin declined by

$ 18 comma 000$18,000​,

which is

less thanless than

11​%

of the budgeted revenues of

$ 2 comma 166 comma 000$2,166,000.

​Overall,

AdlerAdler

feels that the business is running fine

1.	Calculate the​ static-budget variance in​ units, revenues, variable manufacturing​ costs, and contribution margin. What percentage is each​static-budget variance relative to its​ static-budget amount?
2.	Break down each​ static-budget variance into a​ flexible-budget variance and a​sales-volume variance.
3.	Calculate the​ selling-price variance.
4.	Assume the role of management accountant at AmerfondAmerfond. How would you present the results to SteveSteve AdlerAdler​? Should he be more​ concerned? If​ so, why?

​,

Inc. produces the basic fillings used in many popular frozen desserts and

treatslong dash—vanilla

and chocolate ice​ creams, puddings,​ meringues, and fudge.

AmerfondAmerfond

uses standard costing and carries over no inventory from one month to the next. The​ ice-cream product​ group's results for June

20172017

were as​ follows:

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​(Click the icon to view the​ results.) Read the requirements

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.

Requirements 1 and 2. Calculate the​ static-budget variance in​ units, revenues, variable manufacturing​ costs, and contribution margin. What percentage is each​ static-budget variance relative to its​ static-budget amount? Break down each​ static-budget variance into a​ flexible-budget variance and a​ sales-volume variance.

Begin with the flexible budget​ columns, then enter in the sales volume variance and static budget variances.​ Finally, compute the static budget variance as a percentage of the static budget. Label each variance as favorable​ (F) or unfavorable​ (U). ​(For variances with a​ $0 balance, make sure to enter​ "0" in the appropriate field. If the variance is​ zero, do not select a label. Round dollar amounts to the nearest whole dollar and percentages to two decimal​ places, X.XX%.)

		Flexible-
	Actual	Budget		Flexible
	Results	Variances		Budget
Units (pounds)
Revenues
Variable mfg. costs
Contribution margin

Sales-			Static-
Volume		Static	Budget
Variances		Budget	Variances

SB variance
% of Static
Budget
	%
	%
	%
	%

Requirement 3. Calculate the​ selling-price variance.

The selling-price variance is $

Requirement 4. Assume the role of management accountant at

AmerfondAmerfond.

How would you present the results to

SteveSteve

AdlerAdler​?

Should he be more​ concerned? If​ so, why?The​ flexible-budget variances show that for the actual sales volume of

390 comma 000390,000

​pounds, selling prices were

▼

higher

lower

and costs per pound were

▼

higher.

lower.

The

▼

favorable

unfavorable

​sales-volume variance in revenues

▼

adds to

offsets

the

▼

favorable

unfavorable

​variable-cost variance.

AdlerAdler

should

▼

be more

not be

concerned because the small​ static-budget variance in contribution margin is actually made up of​ a(n)

▼

favorable

unfavorable

​sales-volume variance in contribution​ margin, a(n)

▼

favorable

unfavorable

​selling-price variance, and​ a(n)

▼

favorable

unfavorable

variable manufacturing costs variance.

AdlerAdler

Answer 1

1 Ques 1& 2 Performance Report for Luster, Inc., June 2014 2 Flexible BudgetFlexible Budget 3 Static Budget Variance as % of Static Budget Sales Volume Static Static Budget Actual Budget 4 Variances Variances 5 (1) (2) (1)-(3) (3) (4) (3) (5) (5) (6) (1)-(5)(7 = (6) /(5) 6 10,000 F 10,000 F $37,500 F $55,500 U $18.000 U 7 Units (pounds) 8 Revenues 2.63% 390,000 380,000 390,000 $19.500.00u$ $2,203,500 $57,000.00 F $2,166,000 1.73% 2,223,000 1,368,000 1,423,500 $19,500.00 U $39,000 U $36,000.00 9 Variable mfg. costs 0 Contribution margin S 4.06 % 1,404,000 U $21,000 F $780,000 $798,000 2.26% 819,000 1 2 Flexible budget variance $39,000 U $21,000 F 3 Sales volume varaince 4 Static Budget variance $18,000 U 6 Ques 3 7 The selling price variance, caused solely by the 8 difference in actual and budgeted selling price, is the 9 flexible-budget variance in revenues $19,500.00 U 0

1 Ques 4 2 The flexible-budget variances show that for the actual sales volume of 390,000 pounds, selling prices were lower and 3 costs per pound were higher. The favorable sales volume variance in revenues (because more pounds of ice cream 4 were sold than budgeted) helped offset the unfavorable variable cost variance and shored up the results in June 2014. 5 Adler should be more concerned because the static-budget variance in contribution margin of $18,000 U is actually 6 made up of a favorable sales-volume variance in contribution margin of $21,000, an unfavorable selling-price variance 7 of $19,500 and an unfavorable variable manufacturing costs variance of $19,500. Adler should analyze why each of 8 these variances occurred and the relationships among them.