L-A- Downes Consolidabd Industries International uses a standard cost system and record & standards in the accounting records. The standard costs for one unit of one of its products are as follows.
Direct materials3, lbs. @ $20 per lb ......................................$ 6O.00
Direct labor, 2 hrs. @ $15 per hr ...............................................30.00
Variable overhead, 4-machine hrs-@ $1 per hr ...........................4.00
Fixed overhead, 4-machine hrs. @ $2.5O per hr .......................10.00
Total ......................................................................................$ 104.00
Overhead is applied on the basis of machine hours- The planned level of activity (denominator level) is 320,000 machine hours. The total budgeted fixed overhead b $800,000.
Other budgeted items are:
Unit selling Price.................................................................$175.00 per unit
Variable selling & administrative expenses ................................$5 per unit
Fixed selling & administrative expenses .......................................$160,000
Planned level of production and sales ...............................................80,000
ACTUAL RESULTS:
Direct materials purchased ......................... 250,000 lbs- @ $22 per lb
Direct material used ................................................................240,000
Direct labor .......................................................................150,000 hrs
Total cast ............................................................................$2,225,000
Variable overhead .................................................................$340,000
Fixed overhead ......................................................................$810,000
Units produced ..................................................................82,000 units
Units sold ...................................................................................80,500
Selling price per unit ..................................................................160.00
Variable selling & administrative expenses ............................$410,000
Fixed selling& administrative ................................................ $175,000
Actual machine hour.................................................................330,000

REQUIRED:
A Prepare a Master (static) Budgeted Income Statement using variable costing-
B. Prepare a Flexible Budgeted income Statement using variable costing.
C. Prepare an Income Statement of Actual Results using variable costing.
1. Calculate the breakeven point in dollars.
2. Calculate DOL
D. Calculate the following variances and indicate whether each is favorable or unfavorable.
1. Material price variance
2. Materials quantity variance
3. Labor rate variance
4. Labor efficiency variance
5. Variable overhead spending variance (No 6th question)
7. Fixed overhead volume variance
8. Sales price variance
9. Sales quantity variance
10. Variable selling & admin. Exp. Variance
11. Fixed selling & admin. Exp. Variance
E. Prepare reconciliation of master Budget Operational income, Flexible budget operating, and Actual Operating income. Your reconciliation should be properly headed and presented as follows:
Master Budget Operating income
Plus &, /or Minus appropriate variances
Fixable Budget Operating Income
Plus &/or Minus appropriate variances
Actual Operating Incorne
F. Prepare brief comment management on the result of operations. What recommendations would you make to management to improve profitability?