As the new accountant for Cohen & Co., you've been asked to provide a succinct analysis of operating results for the year just ended. You obtain the following information that pertains to the company's sole product.

Requirements
1. What was the actual operating income for the period?
2. What was the company's master budgeted operating income for the period?
3. What was the total master (static) budget variance, in terms of operating income, for the period? Is this variance favorable (F) or unfavorable (U)? Why?
4. From the information given above, are you able to decompose the total master (static) budget variance into a flexible-budget variance and a sales volume variance? Why or why not?
5. Define the meaning of the flexible budget variance and the sales volume variance.

Transcribed Image Text:

Problem Information Master Actual Budget Units sold Sales Variable costs Fixed costs 40,000 S380,000 S210,000 $145,000 45,000 S450,000 S270,000 $135,000