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1 1 Required information [The following information applies to the questions displayed below.] As part of its comprehensive planning and control system, Mopar Company uses a master budget and subsequent variance analysis. You are given the following information that pertains to the company's only product, XL-10, for the month of December Part 1 of 4 Required: 1. Using text Exhibit 14.4 as a guide, complete the missing parts of the following profit report for December. 2. Based on your completed profit report, determine the dollar amount, and label (Favorable or Unfavorable) each of the following variances for December: a. Total master (static) budget variance (also referred to as the total operating income variance for the period). b. Total flexible-budget variance. c. Sales volume variance, in terms of operating income. d. Sales volume variance, in terms of contribution margin. e. Selling price variance. EXHIBIT 14.4 Breakdown of Total Operating Income Variance (1) (2) (5) Master (Static) Budget Actual Units 780 Sales $639,600 Variable costs 350,950 Contribution margin $288,650 Fixed costs 160,650 Operating income $128,000 SCHMIDT MACHINERY COMPANY Analysis of Financial Results For October 2019 (3) Flexible-Budget Flexible Variances Budget 780 $15,600F $624,000 50F 351,000 $15,650F $273,000 10,650U 150,000 $5,000F $123,000 (4) Sales Volume Variances 2200 $176,000U 99,000F $ 77,0000 1,000 $800,000 450,000 $350,000 150,000 $200,000 $ 77,000U Analysis of Total Operating-Income Variance Total operating-income variance" =$128,000-$200,000=$72,000U Flexible-budget variance =$128,000 - $123,000 =$5,000F Sales volume variance =$123,000 - $200,000 =$77,0000 *Budgeted fixed factory overhead cost = $120,000; budgeted fixed selling and administrative expense = $30,000. **Also called the total master (static) budget variance. Note: U denotes an unfavorable effect on operating income, F denotes a favorable effect on operating income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using text Exhibit 14.4 as a guide, complete the missing parts of the following profit report for December. (If a variance has no amount, select "None" in the corresponding dropdown cell.) Actual results Flexible-budget variances Flexible budget Sales volume variances $ Unit sales Sales Variable costs Contribution margin Fixed costs Operating income 117,000 585,000 444,600 140,400 79,000 61,400 Master (static) budget 105,000 $ 525.000 315.000 $ 210,000 92,000 118.000 $ $ Required 1 Required 2 2. Based on your completed profit report, determine the dollar amount, and label (Favorable or Unfavorable)) each of the following variances for December: (If a variance has no amount, select "None" in the corresponding dropdown cell.) a. Total master (static) budget variance (also referred to as the total operating income variance for the period). b. Total flexible-budget variance. C. Sales volume variance, in terms of operating income. d. Sales volume variance, in terms of contribution margin. e. Selling price variance. Show less a. Total master (static) budget variance b. Total flexible-budget variance Sales volume variance, in terms of operating income d Sales volume variance, in terms of contribution margin Selling price variance C. e. 3. Explain what is meant by the labels favorable and unfavorable in terms of a profit-variance report of the type you just prepared for the Mopar Company. 4. What information is contained in the total flexible-budget variance for the period? Include in your answer a short discussion of the component variances that can be calculated to explain the causes of the total flexible-budget variance. 5. Some individuals have recently criticized the use of standard costs and flexible budgets to perform the kinds of variance analyses covered in this chapter. Provide an overview of the arguments for and against the use of standard costs and flexible budgets for operational control purposes