FLEXIBLE BUDGETING3 Total variable
$12.00
$569,000
$540,000
$29,000U
$13.00
$556,000
$585,000
$29,000U
$95,000
$100,000
$5,000F
$160,000
$150,000
$10,000U
$255,000
$250,000
$5,000U
$301,000
$335,000
$34,000U
expenses Contribution margin Fixed expenses Fixed factory overhead Fixed selling and admin Total fixed expenses Operating income From the revised performance report, 45,000 units accounts for $34,000 as the variance for operating income. 4. For Montevideo Manufacturing Inc., the cost control depends on reducing the expenses on the business activities of the company. The management can assess this by determining each cost and evaluating whether they have favorable or unfavorable variance. The total variance for the direct manufacturing labor, direct materials, and variable factory overhead is $26,000. Thus, the manufacturing area did not do an excellent job of controlling the production costs. Additionally, the variance under fixed factory overhead is $5,000 that is favorable. Thus, the favorable variance for fixed factory overhead may have resulted from an inaccurate estimate regarding the budget.
