Master budget:

Flexible budget:

1. Explain what might have caused the fixed costs to be different from the amount budgeted.

2. Assume that the companys materials price variance was favorable and its materials usage variance was unfavorable. Explain why Mr. Richardson may not be responsible for these variances. Now, explain why he may have been responsible for the materials usage variance.

3. Assume the labor price variance is unfavorable. Was the labor usage variance favorable or unfavorable?

4. Is the fixed cost volume variance favorable or unfavorable? Explain the effect of this variance on the cost of each unit produced.

GIVEN \begin{tabular}{|l|r|r|r|r|} \hline & \multicolumn{1}{|c|}{ A } & B & \multicolumn{1}{c|}{ C } & \multicolumn{1}{l|}{ D } \\ \hline 1 & & Flexible Budget & Actual Results & Variances \\ \hline 2 & Number of units & 260000 & 260000 & \\ \hline 3 & Sales revenue & 3900000 & 3950000 & 50000F \\ \hline 4 & Variable manufacturing costs & & & \\ \hline 5 & Materials & 624000 & 622200 & 1800F \\ \hline 6 & Labor & 325000 & 321000 & 4000F \\ \hline 7 & Overhead & 351000 & 354700 & 3700U \\ \hline 8 & Variable selling, general and administrative & 494000 & 501300 & 7300U \\ \hline 9 & Contribution margin & 2106000 & 2150800 & 44800F \\ \hline 10 & Fixed costs & & & \\ \hline 11 & Manufacturing overhead & 1273100 & 1273100 & 0 None \\ \hline 12 & Selling, general and administrative & 479300 & 479300 & 0 None \\ \hline 13 & Net income & 353600 & 398400 & 44800 F \\ \hline \end{tabular}