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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 $8.70 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.
- the sales and variable cost volume variances.
- Classify the variances as favorable (F) or unfavorable (U).
- the amount of fixed cost that will appear in the flexible budget.
- the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity.
Expert Solution
(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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