Formulas: 1. Static budget variance for operating income = Actual operating income static budget operating income 2. Sales volume variance = (Actual units sold static budget units) * Budgeted contribution margin per unit 3. Flexible budget variance for operating income = Actual operating income - Flexible budget operating income 4. Selling price variance = (Actual selling price budgeted selling price) * Actual units sold 5. Materials Price Variance = (AP SP) * AQ purchased 6. Materials Quantity or Usage Variance = (AQ used SQ) * SP; SQ is the budgeted quantity of direct materials that should have been used for the actual production. 7. Labor Rate or Price Variance = (AP SP) * AH 8. Labor Efficiency Variance = (AH SH) * SP; SH is the budgeted quantity of direct labor hours that should have been used for the actual production. 9. Variable Overhead Spending Variance = (Actual Variable manufacturing overhead cost) (AQ*SP); AQ is the actual quantity of overhead cost driver; SP is the budgeted variable overhead rate. 10. Variable Overhead Efficiency Variance = (AQ SQ) * SP; SQ is the budgeted quantity of overhead cost driver that should have been used for the actual production. 11. Fixed Overhead Spending Variance = Actual Fixed Manufacturing Overhead Costs Budgeted Fixed Manufacturing Overhead (Flexible Budget) 12. Fixed Overhead Volume Variance = Budgeted Fixed Manufacturing Overhead (Flexible Budget) Applied (Allocated) Fixed Manufacturing Overhead for the Actual Production Or = Flexible Budget Applied Manufacturing Overhead

Practice Exam 3 Cost Accounti XYZ Company manufactures and sells patio chairs. For the year 2016, XYZ prepared its master budget on the basis of 4,000 units produced and sold. However, in 2016, because of acute competition in the industry, XYZ was only able to produce and sell 3,000 units. Table 1 provides XYZ Company's static budget and actual results using a contribution margin income statement. Table 1 Flexible-Budget Variances (2) Sales Volume Variances Actual Results (1) 3,000 225,000 (1)H3)Flexible Budget (3 4)(35) Static Budget (5) Units Sold 4,000 200,000 Variable Costs Direct Materials Direct Manufacturing Labor Variable Manufacturing Overhead Total Variable Costs Total Contribution Margin Fixed Manufacturing Overhead Operating Income 19,000 7,344 30,000 56,344 168,656 20,000 148,656 24,000 9,600 10,000 43,600 156,400 16,000 140,400 Practice Exam 3 Cost Accounti XYZ Company manufactures and sells patio chairs. For the year 2016, XYZ prepared its master budget on the basis of 4,000 units produced and sold. However, in 2016, because of acute competition in the industry, XYZ was only able to produce and sell 3,000 units. Table 1 provides XYZ Company's static budget and actual results using a contribution margin income statement. Table 1 Flexible-Budget Variances (2) Sales Volume Variances Actual Results (1) 3,000 225,000 (1)H3)Flexible Budget (3 4)(35) Static Budget (5) Units Sold 4,000 200,000 Variable Costs Direct Materials Direct Manufacturing Labor Variable Manufacturing Overhead Total Variable Costs Total Contribution Margin Fixed Manufacturing Overhead Operating Income 19,000 7,344 30,000 56,344 168,656 20,000 148,656 24,000 9,600 10,000 43,600 156,400 16,000 140,400