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Exercise 6-5

Marigold manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and 3,500 canoes. Canoes sell for $800 each. The standard variable cost information for a canoe is as follows.

Direct materials		$	303
Direct labor			170
Variable overhead
Utilities			35
Indirect material			30
Indirect labor			60
Total		$	598

Annual fixed overhead cost is expected to be:

Maintenance		$	19,450
Depreciation			37,200
Insurance			25,180
Rent			29,520
Total		$	111,350

Alexis King chose to prepare a static budget based on sales of 3,000 canoes. Actual sales were 3,100 canoes at a price of $850 each. The company incurred the following costs for the year:

Direct material	$	913,300
Direct labor		499,300
Variable overhead		398,000
Fixed overhead		119,150
Total	$	1,929,750

Prepare a performance report for the year that shows the flexible budget and sales volume variances. (If operating income is negative, enter amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

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