Question

2018 for McCarthy Fendret. Problems Group A P23-25A Preparing a flexible budget performance report Cell One Technologies manufactures capacitors for cellular base stations and other communications applications. The company's July 2018 flexible budget shows output levels of 6,000, 7,500, and 9,500 units. The static budget was based on expected sales of 7,500 units Learning Objective 1 3. Static Bud. Var. for Op. Inc $22,900 F

Answer 1

Cell One Technologies Requirement 1 Flexible Budget Variance Sales Volume Variance Flexible Budget Performance Report For the Month Ended July 31, 2018 Budget Amounts per Unit Units Sales Revenue Variable Expenses Contribution Margin Fixed Expenses Operating Income F 42000 10 Actual Results 9500 206500 100100 106400 56000 50400 7000 5100 1900 1000 Flexible Budget 9500 199500 95000 104500 55000 49500 20000 22000 Static Budget 7500 157500 75000 82500 55000 27500 F 900 F 22000 F Flexible Budget Variance = 50400 - 49500 = 900 F Sales Volume Variance = 49500 - 27500 = 22000 F Static Budget Variance = 22000 F + 900 F = 22900 F $21 per unit x 7,500 units = $157,500 $10 per unit x 7,500 units = $75,000 Requirement 2 Selling 2,000 units more than the static budget level of sales increased Cell One's operating income by $22,000 (which is the $22,000 favorable sales volume variance calculated in Requirement 1). Requirement 3 Cell One's static budget variance for operating income is $22,900 favorable