# RTI Company's master budget calls for production and sale of 18,000 units for $81,000; variable...

## Question:

RTI Company's master budget calls for production and sale of 18,000 units for $81,000; variable costs of $30,600; and fixed costs of $20,000. During the most recent period, the company incurred $32,000 of variable costs to produce and sell 20,000 units for $85,000. During this same period, the company earned $25,000 of operating income.

Required Answers (please explain the math used)

1. Determine the following for RTI Company:

a. Flexible-budget operating income.

b. Flexible-budget variance, in terms of contribution margin.

c. Flexible-budget variance, in terms of operating income.

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.

## Operating Income Variance:

Operating income variance refers to the variance between budgeted income from operating activities and actual income from operating activity of an organization.

## Answer and Explanation: 1

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View this answer1.(a) Flexible-budget operating income is $36,000

(b) Flexible-budget variance, in terms of contribution margin is $3,000 unfavorable.

(c)...

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Chapter 3 / Lesson 5In accounting, variance refers to the difference between actual and projected expenditures. Learn how to calculate variance formulas for cost accounting, explore price, efficiency, spending, and variable overhead variances, and understand the importance of each in evaluating financial performance.

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