Use the flexible budget prepared in P7-4 for the 31,000-unit level and the actual operating results listed below for the 31,000-unit level.

Required:

1. Prepare a performance report.

2. List the major reason why the actual operating income at 31,000 units differs from the master budget operating income at 30,000 units in Figure.

3. Given the level that the company operated at, how was its cost control?
Item
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,800,000
Direct materials:
Lumber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633,000
Paint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,500
Direct labor:
Cutting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,200
Assembly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,300
Painting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,100
Variable factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,905
Variable selling and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 777,400
Fixed factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,500
Fixed selling and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .765,800

Transcribed Image Text:

1 Item 28,000 units 30,000 units 32,000 units $4,200,000 $4,500,000 $4,800,000 2 Sales ($150 per unit) 3 Direct materials 4 Lumber ($20 per unit) 5 Paint ($4 per unit) 6 Direct labor 7 Cutting ($3.75 per unit) 560,000 112,000 600,000 20,000 112,500 640,000 128.000 Assembly ($2.40 per unit) 9 Painting ($1.50 per unit) 10 Variable factory overhead ($6.93 per unit) 11 Variable selling and administrative expense722120 773700 105,000 67,200 42,000 194,040 120,000 76,800 48,000 221,760 72,000 45,000 207,900 ($25.79 per unit) 13 Contribution margin 14 Fixed factory overhead 15 Fixed selling and administrative expense 16 Operating income $2,397,640 207,825 $2,568,900 207,825 $2,740,160 207,825 1415.990