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Homework answers / question archive / Adams Manufacturing Company established the following standard price and cost data:   Sales price $8

Adams Manufacturing Company established the following standard price and cost data:   Sales price $8

Accounting

Adams Manufacturing Company established the following standard price and cost data:

 

Sales price $8.70 per unit

Variable manufacturing cost $3.60 per unit

Fixed manufacturing cost $2,800 total

Fixed selling and administrative cost $800 total

 

Adams planned to produce and sell 2,100 units. Actual production and sales amounted to 2,300 units.

 

 

  1. the sales and variable cost volume variances.
  2. Classify the variances as favorable (F) or unfavorable (U).
  3. the amount of fixed cost that will appear in the flexible budget.
  4. the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity.

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(A) Sales volume variance:

Sales volume variance = Budgeted total sales volume - Actual total sales volume

= (2100 * $8.70) - (2300 * $8.70)

= $18,270 - $20,010

= $1,740  Favourable (because actual sales volume is higher than the budgeted sales volume)

 

(B) Variable cost volume variance:

Variable cost volume variance = Budgeted total variable cost - Actual total variable cost

= (2100 * $3.60) - (2300 * $3.60)

= $7560 - $8280

= $720 Unfavorable (because actual total variable cost is higher than budgeted total variable cost)

 

(C) Fixed Cost:

Fixed cost = Fixed manufacturing costs +Fixed selling & administrative costs

= $2800 + $800 

= $3600

 

(D) Fixed Cost per Unit:

Based on planned activity:

Fixed cost per unit = $3600/2100

= $1.71

Based on actual activity:

Fixed cost per unit = $3600/2300

= $1.57

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