As the new accountant for Cohen & Co., you have been askedto provide a succinct analysis of financial performance for theyear just ended. You obtain the following information that pertainsto the company’s sole product:
| Actual | Master (Static) Budget |
| Units sold | | 35,000 | | | 40,000 | |
| Sales | $ | 394,000 | | $ | 460,000 | |
| Variable costs | | 224,000 | | | 272,000 | |
| Fixed costs | | 142,500 | | | 137,000 | |
|
QUESTIONS:
1. What was the actual operating income for the period?
2. What was the company’s master (static) budget operatingincome for the period?
3. (a) What was the total master (static) budget variance, interms of operating income, for the period? (b) Is this variancefavorable (F) or unfavorable (U)? (Note: The total master(static) budget variance is also referred to as the total operatingincome variance for the period.) (If a variance has noamount, select "None" in the corresponding dropdowncell.)
4. The total master (static) budget variance for a period can bedecomposed into a total flexible-budget variance and a sales volumevariance. (a) What was the total flexible-budget variance for theperiod? (b) Was this variance favorable (F) or unfavorable (U)? (c)What was the sales volume variance for the period? (d) Was thisvariance favorable (F) or unfavorable (U)? (Do not roundyour intermediate calculations. If a variance has no amount, select"None" in the corresponding dropdown cell.)
