(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:

Balance Sheet

An accounting summary that captures a company's financial holdings, debts, and stockholders' equity at a given time.

Income Statement

A financial statement that shows a company's revenues, expenses, and profit over a specific period of time.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (asset, liabilities, and equity) in a balance sheet is represented as a proportion of the total account.

Operating Income

Earnings before interest and taxes (EBIT), representing the profits from a company's regular business operations excluding deductions of interest and taxes.