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Problem 21–2.

The Bradley Company has just completed its first year of operations. A condensed income statement follows, showing actual and standard amounts and the variances:

 sales $2,852.0 $2,718.7 cost of goods sold at standard 1,984.0 1,984.0 manufacturing variances (19.0) _______ ________ gross margin 868.0 715.7 $152.3 general and administrative expense 66.5 57.0 9.5 _______ ________ ______ income $ 801.5 $ 658.7 $142.8 _______ ________ ______ _______ ________ ______ raw materials variances $20,900 f overhead variances: direct labor variances 3,800 f volume $47,300 u both products have standard spending 3,600 f unit costs of $4.00 product a $5.90 $300,000 310,000 product b 5.50 200,000 186,000


The president of Bradley Company has asked you as controller for the following data:

  • a. How much of the variance in income was due to the fact that we sold less than expected of Product B and more of Product A?
  • b. What would have happened to income if we had produced the number of units expected?
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  • c. What would have happened to the total gross margin variance if we had sold the number of units of both A and B that we expected to sell, but at the actual selling prices per unit?
  • d. What is the variance due to the fact that actual selling prices were less than expected? (Product A sold for $5.50 per unit.)

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