The company manufactures tennis rackets and uses a standard costing system. The master budget income statement for April was based on the expectation of producing 20,000 units and selling 16,800 units. The budgeted sales price was $38 per unit, and total budgeted fixed selling and administrative costs were $170,200. There are no variable selling and administrative costs in this firm. Standard manufacturing costs used in determining costs under the master budget are listed below in Exhibit A.

The company actually sold 24,500 units in April. The accountants determined that the actual profits in April were $162,167. The income statement is provided in Exhibit B.

The actual production data for April is given in Exhibit C.

Required:

Pepare a detailed variance analysis of the contribution approach income statement (i.e., variable costing basis) for the month of April (i.e., Compare the actual income statement with the flexible budget income statement and compare the flexible budget income statement with the master budget income statement). Show the variances appearing in the income statement analysis. (You can combine the two types of materials as a single line item in the analysis of the income statement). A template for answering this question is given below. All variances should be marked with either an F for favorable or U for unfavorable.

Use the following Format:

Exhibit A* Per Racket Raw material: Frame: 1.02 frames at $8.00 per frame Stringing materials: 22 feet at $0.13 per foot Direct labor: 0.3 hours at $14.40 per hour Variable overhead Fixed overhead Total standard cost per tennis racket $ 8.16 2.86 4.32 3.66 5.00 $24.00 *Standard costs are calculated for a production volume (denominator level of activity) of 25,000 units each month. Exhibit B Income Statement for April Actual $957,950 Sales: 24,500 rackets at $39.10 Standard cost of goods sold: 24,500 rackets at $24.00 Unfavorable Material variance Unfavorable Labor variance Unfavorable Variable Overhead variance Unfavorable Fixed Overhead variance Cost of goods sold after adjustment for variances Gross Margin Selling and administrative expense Operating profit 588,000 12,830 4,873 6,180 18,900 630,783 327,167 165,000 $ 162,167 Exhibit C Direct materials purchased and used: Stringing materials Frames 512,000 feet at $0.11 per foot 23,000 frames at $8.65 per frame Labor: ($14.65 per hour) 6,820 hours Overhead: Variable Fixed $ 86,700 $128,900 Production 22,000 rackets Actual $$$ Variance $$$ Flexible Variance $$$ $$$ Master $$$ Sales Less V.C. DM DL V-OH CM Less FC Manufacturing Sell & Admin Profits $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ Exhibit A* Per Racket Raw material: Frame: 1.02 frames at $8.00 per frame Stringing materials: 22 feet at $0.13 per foot Direct labor: 0.3 hours at $14.40 per hour Variable overhead Fixed overhead Total standard cost per tennis racket $ 8.16 2.86 4.32 3.66 5.00 $24.00 *Standard costs are calculated for a production volume (denominator level of activity) of 25,000 units each month. Exhibit B Income Statement for April Actual $957,950 Sales: 24,500 rackets at $39.10 Standard cost of goods sold: 24,500 rackets at $24.00 Unfavorable Material variance Unfavorable Labor variance Unfavorable Variable Overhead variance Unfavorable Fixed Overhead variance Cost of goods sold after adjustment for variances Gross Margin Selling and administrative expense Operating profit 588,000 12,830 4,873 6,180 18,900 630,783 327,167 165,000 $ 162,167 Exhibit C Direct materials purchased and used: Stringing materials Frames 512,000 feet at $0.11 per foot 23,000 frames at $8.65 per frame Labor: ($14.65 per hour) 6,820 hours Overhead: Variable Fixed $ 86,700 $128,900 Production 22,000 rackets Actual $$$ Variance $$$ Flexible Variance $$$ $$$ Master $$$ Sales Less V.C. DM DL V-OH CM Less FC Manufacturing Sell & Admin Profits $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$