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Calculate the static-budget and actual operating profit

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Reference no: EM132983833

Question - ThumbDrive Ltd produces USB flash drives (drives). They have the following budgeted standards for the month of March 2019:

Average selling price per drive $9.20

Total direct materials cost per drive $4.60

Direct manufacturing labour

Direct manufacturing labour costs per hour $17.00

Average labour productivity rate (drives per hour) 110

Sales commission cost per unit $0.75

Fixed overhead $990 000

Sales of 700 000 units are budgeted for March. Actual March results are:

Unit sales and production were 90% of plan.

Actual average selling price declined to $8.30.

Productivity dropped to 90 drives per hour.

Actual direct manufacturing labour cost is $15.20 per hour.

Actual total direct materials cost per unit increased to $3.90.

Actual sales commissions were $0.70 per unit.

Fixed overhead costs were $20 000 above plan.

Required -

(a) Calculate the following for March 2019:

1. static-budget and actual operating profit

2. static-budget variance for operating profit

3. flexible-budget operating profit

4. flexible-budget variance for operating profit

5. sales-volume variance for operating profit

6. price and efficiency variances for direct manufacturing labour

7. flexible-budget variance for direct manufacturing labour

(b) What inferences can you draw from the variances calculated in part (a) above?

Reference no: EM132983833

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