This Is What Your Mt 2 Will Look Like You Will Download A Wo

This Is What Your Mt 2 Will Look Like You Will Download A Word Docume

This is what your MT 2 will look like. You will download a word document with the questions and enter answers in the ICON quiz. Problem for Quiz 8 Doyle and company provide the following information about the standard cost per unit for their only product. Price $120.00 Variable manufacturing costs 80.00 Fixed manufacturing costs 20.00 Variable selling expenses 3.00 Fixed selling expenses 12.00 Profit $ 5.00 During April, the firm reported the following actual income statement: Revenue $2,410,740.00 COGS (at standard) 2,043,000.00 Manufacturing cost variances 8,830.00 Gross margin 358,910.00 SGA cost (at standard) 301,290.00 SGA variances 9,457.50 Profit $ 48,162.50 You know the following: · Production volume variance is $8,600 F and the fixed overhead spending variance was $3,000 F. The firm sold all the units it made and there was no change in any inventory. · The variable SGA spending variance was $5,107.50. The firm allocates VSGA using the number of units as the basis. Hint : Use the PVV to figure out the change in volume relative to the budget and the COGS (std) to figure out actual sales. Compute the following: 1. Budgeted profit 2. Sales volume variance 3. Sales price variance 4. Variable manufacturing cost variance 5. Fixed SGA spending variance

Paper For Above instruction

Introduction

The analysis of variances and profit calculations is essential in managerial accounting to evaluate a company's financial performance against its standards and budgets. In this case study, Doyle & Company provides standard costs and actual financial data, allowing us to calculate critical variances and profit metrics to understand operational efficiency and profitability.

1. Budgeted Profit

To determine budgeted profit, we begin with the standard selling price and standard costs per unit. Each product unit sells for $120, with variable manufacturing costs of $80, fixed manufacturing costs of $20, variable selling expenses of $3, and fixed selling expenses of $12. The anticipated profit per unit is $5. Since the actual revenue was $2,410,740, we first calculate the total budgeted units sold.

Total units budgeted = Total standard revenue / Standard price per unit

= $2,410,740 / $120

= 20,089.5 units (rounded to 20,090 units for practical purposes).

Expected profit = (Standard profit per unit units) = $5 20,090 = $100,450.

However, since the actual profit reported is $48,162.50, and the actual revenue and costs are known, the budgeted profit should align with the standard expected profit, considering the units sold. This indicates the budgeted profit was approximately $100,450, based on standard costs and expected sales volume, which would have been the target profit before variances.

2. Sales Volume Variance

The sales volume variance measures the difference between the budgeted and actual sales volume, evaluated at the standard contribution margin per unit.

Contribution margin per unit = Selling price - Variable costs

= $120 - ($80 + $3) = $37.

Actual units sold = Actual revenue / Actual selling price

Given that actual revenue is $2,410,740 and the standard price is $120, actual sales volume is approximately 20,089 units (as above).

Since all units produced were sold, and the actual sales volume matches the budgeted units of 20,090, the sales volume variance is minimal. But considering the production volume variance is $8,600 favorable, it indicates the actual sales volume exceeded the budgeted volume by approximately the variance amount in dollars.

Sales volume variance = Contribution margin per unit * (Actual units - Budgeted units)

Given variances, the sales volume variance in dollar terms can be calculated as:

= $37 * (Actual units - Budgeted units).

With the data, the sales volume variance is approximately $8,600 F, confirming higher sales volume than planned.

3. Sales Price Variance

Sales price variance reflects the effect of actual selling prices differing from standard prices.

Sales price variance = (Actual selling price - Standard price) * Actual units sold.

Since the actual revenue and units are known, the actual selling price per unit = $2,410,740 / 20,089 ≈ $120, consistent with the standard price. Therefore, the sales price variance is negligible or zero.

4. Variable Manufacturing Cost Variance

This variance captures the difference between actual variable manufacturing costs and standard costs for the actual units produced.

Standard variable manufacturing cost per unit = $80.

Total standard variable manufacturing costs for actual units = 20,089 units * $80 = $1,607,120.

Actual manufacturing costs are embedded within the manufacturing cost variances of $8,830, which suggests unfavorable variance.

The variable manufacturing cost variance equals:

= (Actual variable manufacturing costs - Standard variable manufacturing costs).

Given the total manufacturing variance of $8,830 unfavorable, and considering the production volume and costs, the variance per unit is:

Variable manufacturing cost variance per unit = $8,830 / 20,089 ≈ $0.44 unfavorable per unit.

Total actual variable manufacturing costs = $80 * 20,089 + $8,830 (variance) = $1,607,120 + $8,830 = $1,615,950.

5. Fixed SGA Spending Variance

The fixed SGA spending variance reflects the difference between actual and standard fixed selling, general, and administrative expenses.

Standard fixed SGA expenses = 20,089 units * $12 = $241,068.

Actual fixed SGA expenses = Standard amount + Variance

= $241,068 + (unfavorable or favorable variance).

Given the variance is not directly provided, but the variance reported is $9,457.50 unfavorable, indicating actual fixed SGA expenses = $241,068 + $9,457.50 = $250,525.50.

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Conclusion

The detailed variance analysis reveals that Doyle & Company experienced favorable sales volume variances, high sales revenue, but also incurred variances in manufacturing and SGA expenses. The nearly matching actual and standard costs indicate effective cost control, with slight unfavorable variances in fixed expenses offsetting some benefits of higher sales volume. These insights underscore the importance of variance analysis in managerial decision-making, helping identify areas of operational strength and opportunities for cost management.

References

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