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Question - The Back2Life budgeted to market and sell 5,000 of these work stations at $200,000 per station in 2021. They budgeted $200,000 fixed costs/year and $80.00 variable cost per station. They ended up selling 6,000 stations at $190.00, and incurred $220,000 fixed cost for the year and $78.00 variable cost per station.
1. Prepare a comprehensive variance analysis report for Back2Life and identify the sales-volume variance and flexible budget. Be sure to label all F for favorable or U for unfavorable. Use your cost accounting knowledge to tell the Back2Life execs what the variance numbers are indicating?
2. Based on the numbers that you find, give your cost accounting advice to the Back2Life company so they can better sort out their accounting and make a more organized decision making and business strategy for the rest of 2021 and 2022. What should they do long term to keep their success going after?
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