Flexible budget and sales volume variances, market-share and ...

[kwoodring]

Flexible budget and sales volume variances, market-share and market-size variances.
 
  Luster, Inc., produces the basic fillings used in many popular frozen desserts and treatsvanilla and chocolate ice creams, puddings, meringues, and fudge. Luster uses standard costing and carries over no inventory from one month to the next. The ice-cream product group's results for June 2014 were as follows:
 
  Sam Adler, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were u

Question 2

Assuming a normal balance, which of the following is correct concerning the balance sheet columns of the work sheet?
 a. Accumulated Depreciation is shown as a debit.
  b. Accumulated Depreciation is shown as a credit.
  c. Depreciation Expense is shown as a debit.
  d. Depreciation Expense is shown as a credit.

[zenzy]

Answer to Question 1

1. and 2.
Performance Report for Luster, Inc., June 2014
Actual Flexible Budget Variances Flexible Budget Sales Volume
Variances Static Budget Static
Budget Variance Static Budget Variance as
 of Static Budget
(1) (2) = (1)  (3) (3) (4) = (3)  (5) (5) (6) = (1)  (5) (7) = (6) (5)

Units (pounds) 350,000 - 350,000 15,000 F 335,000 15,000 F 4.48
Revenues 2,012,500  52,500 U 2,065,000a 88,500 F 1,976,500 36,000 F 1.82
Variable mfg. costs 1,137,500 52,500 U 1,085,000b 46,500 U 1,038,500 99,000 U 9.53
Contribution margin 875,000  105,000 U  980,000  42,000 F 938,000  63,000 U 6.72

105,000 U  42,000 F
Flexible-budget variance Sales-volume variance

63,000 U
Static-budget variance

a Budgeted selling price = 1,976,500  335,000 lbs = 5.90 per lb.
Flexible-budget revenues = 5.90 per lb.  350,000 lbs. = 2,065,000

b Budgeted variable mfg. cost per unit = 1,038,500  335,000 lbs. = 3.10
Flexible-budget variable mfg. costs = 3.10 per lb.  350,000 lbs. = 1,085,000

3. The selling price variance, caused solely by the difference in actual and budgeted selling price, is the flexible-budget variance in revenues = 52,500 U.

4. The flexible-budget variances show that for the actual sales volume of 350,000 pounds, selling prices were lower and costs per pound were higher. The favorable sales volume variance in revenues (because more pounds of ice cream were sold than budgeted) helped offset the unfavorable variable cost variance and shored up the results in June 2014. Adler should be more concerned because the static-budget variance in contribution margin of 63,000 U is actually made up of a favorable sales-volume variance in contribution margin of 42,000, an unfavorable selling-price variance of 52,500 and an unfavorable variable manufacturing costs variance of 52,500. Adler should analyze why each of these variances occurred and the relationships among them. Could the efficiency of variable manufacturing costs be improved? The sales volume appears to have increased due to the lower average selling price per pound.

Answer to Question 2

B

[kwoodring]

Thanks for the timely response, appreciate it

[hollysheppard095]

Excellent