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Ralph Electronics had the following budgeted cost per unit for each category: Actual Results Flexible budget Units sold 15,000 15,000 Revenues $3,975,000 $3,600,000 Variable costs Direct materials 1,000,000 900,000 Direct manufacturing labor 1,500,000 1,275,000 Variable manufacturing overhead 250,000 225,000 Total variable costs 2,750,000 2,400,000 Contribution margin 1,225,000 1,200,000 Fixed costs 450,000 1,000,000 Operating income $775,000 $200,000 What is the flexible-budget variance for operating income for Ralph Electronics for the year?

Respuesta :

Answer:

The flexible-budget variance for operating income is $575,000 favorable

Explanation:

In order to arrive at the flexible-budget variance for operating income, a thorough of line by line variance would be gives the makeup of the variance

                                     Actual results         Flexible budget    Variance

Units sold                          15,000                  15,000                  nil

                                            $                             $                         $

Revenue                     3,975,000                 3,600,000           375,000 F

Variable costs

Direct materials         1,000,000                   900,000             100,000 U

Direct maf. labor        1,500,000                  1,275,000            225,000 U

Variable maf, ov.          250,000                    225,000               25,000 U

Fixed costs                     450,000                 1,000,000            550,000 F

Operating income         775,000                      200,000            575,000 F

The flexible-budget variance for operating income is $575,000($775,000-$200,000)  

This can also be calculated as

$375000-$100,000-$225,000-$25000+$550,000=$575,000          

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