Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 162,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials (3 pounds @ $2) $ 6 Direct labor (0.25 hours @ $32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Sales revenue $ 11,300 Less variable costs Direct materials 1,094 Direct labor 1,307 Variable overhead 690 Total variable costs $ 3,091 Contribution margin $ 8,209 Less fixed costs Fixed manufacturing overhead 1,695 Nonmanufacturing costs 2,132 Total fixed costs $ 3,827 Operating profit $ 4,382 Required: Prepare a profit variance analysis. Note: 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.

26th Edition

ISBN:9781285743615

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter21: Cost Behavior And Cost-volume-profit Analysis

Section: Chapter Questions

Problem 21.26EX: Items on variable costing income statement In the following equations, based on the variable costing...

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Question

Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 162,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows:

Direct materials	(3 pounds @ $2)	$ 6
Direct labor	(0.25 hours @ $32)	8

Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable.

The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products:

Sales revenue	$ 11,300
Less variable costs
Direct materials	1,094
Direct labor	1,307
Variable overhead	690
Total variable costs	$ 3,091
Contribution margin	$ 8,209
Less fixed costs
Fixed manufacturing overhead	1,695
Nonmanufacturing costs	2,132
Total fixed costs	$ 3,827
Operating profit	$ 4,382

Required:

Prepare a profit variance analysis.

Note: 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.