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Paul Jarvis is the controller of Crane Industries. Paul prepared the following budgeted income statement at various levels of sales. After careful review of the
Paul Jarvis is the controller of Crane Industries. Paul prepared the following budgeted income statement at various levels of sales. After careful review of the budgeted income statements, and after discussions with the sales and production managers, the CEO determines that the best alternative is to base the budget on a sales volume of 43000 units. Budgeted Income Statements Units 33000 43000 53000 Sales $2475000 $3225000 $3975000 Variable costs Direct material 561000 731000 901000 Direct labor 495000 645000 795000 Overhead 528000 688000 848000 Total variable costs 1584000 2064000 2544000 Contribution margin 891000 1161000 1431000 Fixed costs Overhead 75000 75000 75000 Rent 59000 59000 59000 Insurance 41000 41000 41000 Advertising 28000 28000 28000 Total fixed costs 203000 203000 203000 Operating income $ 688000 $ 958000 $ 1228000 Actual results for the year were 40000 units, reflected in the following income statement: Sales $3040000 Variable costs Direct material 720000 Direct labor 620000 Overhead 648000 Total variable costs 1988000 Contribution margin 1052000 Fixed costs Overhead 70700 Rent 52300 Insurance 35600 Advertising 20500 Total fixed costs 179100 Operating income $ 872900 What is the flexible budget variance for direct labor? $45000 unfavorable $20000 favorable O $25000 favorable O $20000 unfavorable
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