Calculating and interpreting sales volume and flexible budget variances (LO1, LO2, LO3). Space Toys manufactures a popular toy rocket ship. The companys master budget and actual operating results for July are:

	Master Budgeted	Actual Results
Rocket ship sales	15,000 units	12,000 units
Revenues	$375,000	$300,000
Variable costs	75,000	54,000
Contribution margin	300,000	246,000
Fixed costs	150,000	141,000
Profit	$150,000	$105,000

The owner of Space Toys is alarmed that actual revenue decreased by 20% and, more importantly, that actual profit decreased by 30% compared to the master budget. Be-cause of these numbers, the owner is convinced that both the marketing director, who is responsible for sales, and the production manager, who is responsible for controlling costs, did not do a good job last quarter.

Required:

a. What is Space Toys flexible budget for July?

b. What are Space Toys sales volume and sales price variances for July?

c. What are Space Toys variable cost and fixed cost variances for July?

d. In light of your answers above, who do you believe is responsible for Space Toys poor profit performance in July?