| Solution-Week 3 assignment-ACC 543 |
| Background |
| RTI Company's master budget calls for production and sales of 18,000 units for $81,000; variable costs of $30,600; and fixed |
| costs of $20,000. The company incurred $32,000 of variable costs to produce and sell 20,000 units for $85,000, and earned |
| $25,000 operating income. |
| Problem Information |
| Master budget sales volume (units) | | 18,000 |
| Budgeted total sales revenue | | $81,000 |
| Budgeted total variable costs | | $30,600 |
| Budgeted fixed costs | | $20,000 |
| Actual variable costs incurred | | $32,000 |
| Actual production/sales volume (units) | | 20,000 |
| Actual total sales revenue | | $85,000 |
| Actual operating income | | $25,000 |
| Requirements |
| 1. Determine RTI Company’s |
| a. Flexible budget operating income. |
| b. Contribution margin flexible-budget variance. |
| c. Operating income flexible-budget variance. |
| d. Sales volume variance, in terms of contribution margin. |
| e. Sales volume variance, in terms of operating income. |
| 2. Explain why the contribution margin sales volume variance and the operating income sales volume variance for the same |
| period are likely to be identical. |
| 3. Explain why the contribution margin flexible-budget variance is likely to differ from the operating income flexible-budget |
| variance for the same period. |
| Solution |
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