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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company

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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @ $4) (0.5 hours @ $24) $ 8 12 Es Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. $ 7,238 Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead 748 1,010 930 $2,688 $ 4,550 1,050 Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement in thousands of dollars) for the year. $7,238 Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs Operating profit 748 1,010 930 $ 2,688 $4,550 1,050 1,230 $ 2,280 $2,270 PAYNESVILLE CORPORATION Profit Variance Analysis Manufacturing Non-Manufacturing Variances Variances Actual Sales Price Variance Flexible Budget Sales Activity Varance Master Budget $ F 7.238 748 1,010 930 2,688 4,550 F Sales revenue Materials Direct labor Variable overhead Total variable costs Contribution margin Fixed costs: Manufacturing Non-manufacturing Total fixed costs Operating profits 0 $ $ $ $ 0 0 $ $ 0 1,050 1.230 2.280 $ $ 0 $ $ $ 2.270 5 0

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