Refer to the information in Problem 24 3A. Pebco Company’s actual income statement for 2011 follows.
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PEBCO COMPANY Statement of Income from Operations For Year Ended December 31, 2011 |
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Sales (24,000 units) |
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$3,648,000 |
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Cost of goods sold |
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|
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Direct materials |
$1,400,000 |
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Direct labor |
360,000 |
|
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Machinery repairs (variable cost) |
60,000 |
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Depreciation—plant equipment |
250,000 |
|
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Utilities (fixed cost is $154,000) |
218,000 |
|
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Plant management salaries |
155,000 |
2,443,000 |
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Gross profit |
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1,205,000 |
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Selling expenses |
|
|
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Packaging |
90,000 |
|
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Shipping |
124,000 |
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Sales salary (annual) |
162,000 |
376,000 |
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General and administrative expenses |
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|
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Advertising expense |
104,000 |
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Salaries |
232,000 |
|
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Entertainment expense |
100,000 |
436,000 |
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Income from operations |
|
$ 393,000 |
Required
1. Prepare a flexible budget performance report for 2011.
2. Analyze and interpret both the (a) sales variance and (b) direct materials variance.