(Appendix 10C)Yukon Company Expressed the Total Expenses (Y)component of Its

question 54

Essay

(Appendix 10C)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40 * X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows:
$\begin{array}{|l|r|}\hline \text { Sales } & \text { 5,400 units* } \\\hline & \\\hline \text { Sales revenue } & \$ 324,000 \\\hline \text { Less variable costs } & 194,400 \\\hline \text { Contribution margin } & \$ 129,600 \\\hline \text { Less fixed expenses } & 102,000 \\\hline \text { Operating income } & \$ 27,600 \\\hline\end{array}$
*Actual industry sales volume was 60,000 units.
Required:
a)Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b)Calculate the sales volume variance and analyze it into market-size (industry volume)variance and market-share variance.
c)On the basis of your analysis in parts (a)and (b),would you recommend a bonus be paid to the sales manager? Why or why not?

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Definitions:

Compounded monthly

Interest calculation method where interest is added to the principal every month, increasing the amount of future interest accruals.

College fund

A sum of money saved or invested over time, designated for covering future college education expenses.

Compounded monthly

Interest calculation method where the interest is added to the principal each month for the purpose of the next month's interest calculation, effectively increasing the amount over time.

Economic value

The monetary worth of a good or service as determined by the market.