Pokeman Bunch Inc., manufactures Poke Monster figures and has the following data from its operation for the year just completed.

Actual A Flexible Budget B Master Budget Units 1,500 1,200 Sales (dollars)$93,000 C $18,000F Variable cost E $60,000 Contribution Margin $1,500U D Fixed cost F $5,000 Operating income$7,500

The total operating-income variance, to the nearest dollar, is:

$500 favorable

1. Master budget fixed costs = flexible budget fixed costs ($5,000—given) = $5,000

2. Master budget selling price per unit:Flexible-budget (FB) sales volume = actual sales volume (given) = 1,500 units.Sales volume variance, in units = FB sales volume ? Master budget sales volume = 1,500 units (above) ? 1,200 units (given) = 300 units.Budgeted selling price per unit = sales volume variance in sales dollars/sales volume Variance in units = $18,000 (given)/300 units (above) = $60.00/unit.

3. Master budget variable cost per unit = master budget total variable cost/master budget sales volume = $60,000/1,200 units = $50.00

4. Master budget operating income = master budget contribution margin ? master budget fixed costs = (1,200 units (given) × [$60.00 ? $50.00]) ? $5,000 = (1,200 units × $10.00/unit) ? $5,000 = $7,000.

5. Finally, total operating-income variance = actual operating income ? master budget operating income = $7,500 (given) ? $7,000 = $500F (to the nearest dollar). Note: the variance here is favorable (F) because actual operating income > budgeted operating income (as reflected in the Master Budget).

Europa Company