Opal Manufacturing Company established the following standard price and cost information:
$\begin{array}{lr}
\text { Sales price } & \$ 50 \text { per unit } \
\text { Variable manufacturing cost } & \$ 32 \text { per unit } \
\text { Fixed manufacturing cost } & \$ 100,000 \text { total } \
\text { Fixed selling and administrative cost } & \$ 40,000 \text { total }
\end{array}$ For the current year, Opal budgeted to manufacture 25,000 units while it actually manufactured 26,500 units.
Required:Determine the sales volume variances, including variances for number of units, sales revenue, variable manufacturing cost, fixed manufacturing cost, and fixed selling and administrative cost.Classify the variances as favorable (F) or unfavorable (U).Comment on the usefulness of the variances with respect to performance evaluation.Explain why the fixed cost variances are zero.

Question

Opal Manufacturing Company established the following standard price and cost information:
 $\begin{array}{lr}
\text { Sales price } & \$ 50 \text { per unit } \
\text { Variable manufacturing cost } & \$ 32 \text { per unit } \
\text { Fixed manufacturing cost } & \$ 100,000 \text { total } \
\text { Fixed selling and administrative cost } & \$ 40,000 \text { total }
\end{array}$  For the current year, Opal budgeted to manufacture 25,000 units while it actually manufactured 26,500 units.
Required:Determine the sales volume variances, including variances for number of units, sales revenue, variable manufacturing cost, fixed manufacturing cost, and fixed selling and administrative cost.Classify the variances as favorable (F) or unfavorable (U).Comment on the usefulness of the variances with respect to performance evaluation.Explain why the fixed cost variances are zero.

Quizplus · Accepted Answer

The Answer of Opal Manufacturing Company established the following standard price and cost information:
 $\begin{array}{lr}
\text { Sales price } & \$ 50 \text { per unit } \
\text { Variable manufacturing cost } & \$ 32 \text { per unit } \
\text { Fixed manufacturing cost } & \$ 100,000 \text { total } \
\text { Fixed selling and administrative cost } & \$ 40,000 \text { total }
\end{array}$  For the current year, Opal budgeted to manufacture 25,000 units while it actually manufactured 26,500 units.
Required:Determine the sales volume variances, including variances for number of units, sales revenue, variable manufacturing cost, fixed manufacturing cost, and fixed selling and administrative cost.Classify the variances as favorable (F) or unfavorable (U).Comment on the usefulness of the variances with respect to performance evaluation.Explain why the fixed cost variances are zero.

Opal Manufacturing Company Established the Following Standard Price and Cost