Question

Cost Accounting

RTI Company’s master budget calls for production and sale of 18,700 units for $93,500; variable costs of $39,270; and fixed costs of $18,300. During the most recent period, the company incurred $32,700 of variable costs to produce and sell 18,300 units for $85,700. During this same period, the company earned $25,700 of operating income. (Do not round intermediate calculations. Round final answer to the nearest whole dollar.)
1)Sales volume variance, in terms of contribution margin.
2)Sales volume variance, in terms of operating income.

Answer 1

The sales volume variance, in terms of contribution margin, is -$23,490, and the sales volume variance, in terms of operating income, is -$10,230.

Step-by-step explanation:

The sales volume variance, in terms of contribution margin, can be calculated by subtracting the budgeted contribution margin from the actual contribution margin and multiplying it by the actual sales volume. In this case, the budgeted contribution margin can be calculated by subtracting the variable costs from the sales revenue in the master budget: $93,500 - $39,270 = $54,230. The actual contribution margin can be calculated by subtracting the variable costs from the actual sales revenue: $85,700 - $32,700 = $53,000. The sales volume variance can then be calculated: ($53,000 - $54,230) x 18,300 = -$23,490.

The sales volume variance, in terms of operating income, can be calculated by subtracting the budgeted operating income from the actual operating income. The budgeted operating income can be calculated by subtracting the fixed costs from the budgeted contribution margin: $54,230 - $18,300 = $35,930. The actual operating income is given as $25,700. The sales volume variance can then be calculated: $25,700 - $35,930 = -$10,230.