As the new accountant for Cohen & Co., you have been asked to provide a succinct analysis of financial performance for the year just ended. You obtain the following information that pertains to the company’s sole product:
Master (Static
Actual Budget
Units sold 35,000 40,000
Sales $390,000 $375,000
Variable costs $220,000 $220,000
Fixed costs $153,125 $145,000
Required:
1. What was the actual operating income for the period?
2. What was the company’s master budget operating income for the period?
3. What was the total master (static) budget variance, in terms of operating income, for the period? Is this variance favorable or unfavorable?
4. From the information given earlier, decompose the total master (static) budget variance by determining the amounts for:
a- The total flexible-budget variance, is this variance favorable or unfavorable?
b- The sales volume variance, is this variance favorable or unfavorable?
