Craft Inc.

Actual Contribution Income Statement

For Month of October

Sales

$ 230,000

Less Variable costs

Variable cost of goods sold:

Direct materials

$ 40,000

Direct labor

15,000

Manufacturing overhead

13,500

$ 68,500

Selling and distribution

38,000

(106,500)

Contribution Margin

123,500

Less Fixed Costs:

Manufacturing overhead

39,000

Selling and Distribution

31,000

(70,000)

Net Income(Loss)

53,500

Required:

1. Prepare a flexible budget performance report for Production that compares actual and allowed costs.

2. Prepare a flexible budget performance report for selling and distribution that compares actual and allowed costs.

3. Determine the revenue variance.

4. Determine the sales price variance.

5. Determine the sales volume variance.

6. Explain to management the areas that should be investigated. Explain why you picked these areas to look at.

1. Prepare a flexible budget performance report for Production that compares actual and allowed costs.

Production Department

Flexible Budget Performance Report

For Month of October

Actual costs

Flexible Budget Cost

Flexible Budget Variances

Designation U or F

Units

Direct Materials

$ 40,000

$ 35,002

$ 4,998

u

Direct Labor

Variable Manufacturing overhead

Fixed Manufacturing

Total

2. Prepare a flexible budget performance report for selling and distribution that compares actual and allowed costs.

Selling and Distribution Cost Center

Flexible Budget Performance Report

For Month of October

Actual costs

Flexible Budget Cost

Flexible Budget Variances

Designation U or F

Units

Selling and Distribution:

Variable

Fixed

Total

3. Determine the revenue variance.

4. Determine the sales price variance.

5. Determine the sales volume variance.

6. Explain to management the areas that should be investigated. Explain why you picked these areas and your response must include details of the specifics of these variances.