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Marlow Manufacturing Company established the following standard price and cost data.
Sales Price $7.50 per unit
Variable Manufacturing costs 3.00 per Unit
Fixed Manufacturing costs 3,000 total
Fixed selling and administrative costs 1,000 total
Marlow planned to produce and sell 1,000 units. Actual production and sales amounted to 1,300.
a. Determine cost and sales and variable volume variances.
b. Classify the variances as (F)avorable or (U)nfavorable.
c. Comment on the usefulness of the variances with respect to performance evaluation and identify the member of the management team most likely to be responsible for these variances.
d. Determine the amount of fixed cost that will appear in the flexible budget.
e. Determine the fixed cost per unit based in planned activity and the fixed cost per unit based on actual activity. Assuming Marlow uses the information in the master budget to price the company's product, comment on how the volume variance could affect the company's profitability.