Question

EXHIBIT 14.4 Breakdown of Total Operating Income Variance SCHMIDT MACHINERY COMPANY Analysis of Financial Results For October 2019 (2) (3) Flexible-Budget Flexible Variances Budget (1) (4) Sales Volume Variances (5) Master (Static) Budget Actual Units 780 0 780 1,000 Sales Variable costs Contribution margin Fixed costs Operating income $639,600 350,950 $288,650 160,650 $128,000 $15,600F 50F $15,650F 10,650U $ 5,000F $624,000 351,000 $273.000 150,000 $123,000 2200 $176,0000 99,000F $ 77,0000 $800,000 450,000 $350,000 150,000 $200,000 $77,000U Analysis of Total Operating-Income Variance Total operating-income variance** =$128,000-$200,000=$72,000U Flexible-budget variance =$128,000 - $123,000 =$5,000F Sales volume variance =$123,000 - $200,000 =$77,000U *Budgeted fixed factory overhead cost = $120,000; budgeted fixed selling and administrative expense = $30,000 **Also called the total master (static) budget variance. Note: U denotes an unfavorable effect on operating income; F denotes a favorable effect on operating income.

Answer 1

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Income Statement Performance Report 1 Sales Flexible-budgetFlexible Actual volume Master Budget 120,000 $0 Budget Results Variances variance Units Sales Revenue Less: Variable Cost Contribution Margin Less: Fixed Cost 120,000 110,000 $600,000 $456,000 $144,000 $80,000 $600,000 $50,000 F $550,000 $360,000 $30,000 u $330,000 $240,000 $20,000 F $220,000 $95,000 $96,000 U $96,000 U -$15,000 F $95,000 $0 $64,000 $81,000 U$145,000$20,000 F$125,000 Operating Income 2 $61,000 Unfavourable Total Master budget variance а $81,000 Unfavourable b Total Flexible Budget variance $20,000 Favourable Sales volume variance, in terms of Operating Income C $20,000 Favourable d Sales volume variance, in terms of Contribution margin Selling price variance None е