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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company canties no Inventories. The master budget calls for the company
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company canties no Inventories. The master budget calls for the company to manufacture and sell 114,000 liters at a budgeted price of $180 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @ $11) (0.5 hours @ $38) $22 19 Variable overhead is applied based on direct labor hours. The variable overhead rate is $90 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $45 per unit. All non-manufacturing costs are fixed and are budgeted at $1.9 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $564.000 unfavorable The following is the actual income statement (in thousands of dollars) for the year. $19,698 Sales revenue tess 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 2,158 1,080 1,000 $ 4,238 $15,460 1,120 1,300 $ 2,420 $13,040 Required: Prepare a profit variance analysis. (Enter your answers in thousands of dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) PAYNESVILLE CORPORATION Profit Variance Analysis Manutacturing Non-Manufacturing Variances Variances Actual Sale Price Variance Flexible Budget Sales Activity Variance 5 19.698 2150 1080 1.000 4238 5 5 $ $ $ Sales revenue Materials Direct labor Variable overhead Total variable costs Contribution margin Fixed code Manufacturing Non manufacturing Total foxed costs Operating profits 15.400 0 1,120 1 300 2 420 13.040 5 $ 0 0 5 5 $ 5 0
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