Problem 16-46 Solve for Master Budget Given Actual Results (LO16-2, 4)
A new accounting intern at Gibson Corporation lost the only copyof this period's master budget. The CFO wants to evaluateperformance for this period but needs the master budget to do so.Actual results for the period follow:
Sales volume 130,000 units Sales revenue $ 873,600 Variable costs Manufacturing 192,192 Marketing andadministrative 78,624 Contribution margin $ 602,784 Fixed costs Manufacturing 251,200 Marketing andadministrative 146,000 Operating profit $ 205,584
The company planned to produce and sell 110,500 units for $6.00each. At that volume, the contribution margin would have been$464,100. Variable marketing and administrative costs are budgetedat 10 percent of sales revenue. Manufacturing fixed costs areestimated at $2.40 per unit at the normal volume of 110,500 units.Management notes, "We budget an operating profit of $1.00 per unitat the normal volume."
Required:
a. Construct the master budget for the period.(Do not round intermediate calculations.)
GIBSON CORPORATION Master Budget Salesvolume units Salesrevenue Variablecosts: Manufacturing Marketingand administrative Contribution margin $0 Fixedcosts: Manufacturing Marketingand administrative Operating profit $0
b. Prepare a profit variance analysis.(Do not round intermediate calculations. Indicate theeffect of each variance by selecting "F" for favorable, or "U" forunfavorable. If there is no effect, do not select eitheroption.)
GIBSON CORPORATION Profit Variance Analysis Actual (130,000 Units) Manufacturing Variances Marketing and Administrative Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget Sales revenue $873,600 Variable costs: Manufacturing 192,192 Marketing andadministrative 78,624 Contribution margin $602,784 Fixed costs: Manufacturing 251,200 Marketing andadministrative 146,000 Operating profit $205,584
Problem 16-46 Solve for Master Budget Given Actual Results (LO16-2, 4)
A new accounting intern at Gibson Corporation lost the only copyof this period's master budget. The CFO wants to evaluateperformance for this period but needs the master budget to do so.Actual results for the period follow:
| Sales volume | 130,000 | units | |
| Sales revenue | $ | 873,600 | |
| Variable costs | |||
| Manufacturing | 192,192 | ||
| Marketing andadministrative | 78,624 | ||
| Contribution margin | $ | 602,784 | |
| Fixed costs | |||
| Manufacturing | 251,200 | ||
| Marketing andadministrative | 146,000 | ||
| Operating profit | $ | 205,584 | |
The company planned to produce and sell 110,500 units for $6.00each. At that volume, the contribution margin would have been$464,100. Variable marketing and administrative costs are budgetedat 10 percent of sales revenue. Manufacturing fixed costs areestimated at $2.40 per unit at the normal volume of 110,500 units.Management notes, "We budget an operating profit of $1.00 per unitat the normal volume."
Required:
a. Construct the master budget for the period.(Do not round intermediate calculations.)
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b. Prepare a profit variance analysis.(Do not round intermediate calculations. Indicate theeffect of each variance by selecting "F" for favorable, or "U" forunfavorable. If there is no effect, do not select eitheroption.)
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Related questions
Each question refers to the same initial data. Treat each question separately. Ignore income taxes. Assume no beginning or ending inventories. Calculations and backup should be completed and submitted in Excel. Use proper Contribution Income Statement formatting. Analysis can either be typed into cells in Excel (formatted to be easily legible) or typed into a text box in Excel.
Data for all questions: Tamâs Tables produces wooden kitchen and dining room tables. Their tables are sold at many local furniture stores. The cost of manufacturing and marketing their tables, at their normal factory volume of 2,000 tables per month, is shown in the table below. These tables sell for $700 each. Tamâs Tables is making a small profit, but would prefer to increase profitability.
(Note: Fixed costs are shown on a per-unit basis in the table based on normal volume. However, fixed costs as a total do not change when volume changes, so you will need to determine total fixed costs first.)
| Per Unit | Per Unit | |
| Unit Manufacturing Costs: | ||
| Variable Materials | $ 175.00 | |
| Variable Labor | $ 125.00 | |
| Variable Overhead | $ 50.00 | |
| Fixed Overhead | $ 150.00 | |
| Total Unit Manufacturing Costs: | $ 500.00 | |
| Unit Marketing Costs: | ||
| Variable Marketing Costs | $ 75.00 | |
| Fixed Marketing Costs | $ 100.00 | |
| Total Unit Marketing Costs: | $ 175.00 |
Question 1: What is the break-even point? A) In units? B) In sales dollars?
Question 2: A large furniture chain has offered to purchase 2,000 tables (one time for their family dinner advertising campaign) if the sales price was lowered to $575 per table. Tamâs Tablesâ maximum capacity is 3,000 units. A) Based on the cost data provided, what would be the impact of the price decrease on sales, costs, and operating income if Tamâs Tables accepted this sale? Use a contribution margin income statement to show your results. B) Do you think Tamâs Tables should accept this sale? Support your decision with evidence and analysis.
Question 3: Some of the furniture stores have been asking for granite-topped tables. Tamâs Tables would be able to produce a granite-topped table with their wooden frame and legs on their existing assembly line if they purchased a new machine to shape the granite top. This would increase fixed overhead costs by $150,000 per month (still based on normal production volume of 2,000 units). The variable materials costs for the granite tables would also be double the cost of the variable materials for the granite tables (the granite is more expensive than the wood). Maximum production for both types of tables together would still be 3,000 units because the same assembly line would be used. The granite tables would sell for $1,000 each. A) What would be the break-even point if Tamâs Tables only sold granite tables? (In units and sales dollars) B) Create a contribution income statement for a month in which Tamâs Tables sold 1,000 wooden tables, and 1,500 granite tables. C) Explain, in your own words, how the changes to fixed and variable costs for the granite tables impact profitability.
