Question

5.                                                         Master Budget                        Actual Results

Sales Volume in Unit                                     2,500                                     2,700

Sales Revenue                                     $          37,500                                     41,000

Variable Cost of Goods Sold                          20,000                                     21,200

Variable S&A                                                 5,000                                     5,500

Contribution Margin                                       12,500                                     14,300

Fixed Cost of Goods Sold                              4,000                                     4,200

Fixed S&A                                                      3,000                                     2,900

Operating Income                                           5,500                                     7,200

a. Make a flexible budget.

b. Compute a revenue/spending variance and indicate its favorability.

Answer 1

Solution a& b:

Particulars	Actual results	Revenue and spending variances		Flexible Budget
Nos of units	2700			2700
Sales revenue	$41,000.00	$500.00	F	$40,500.00
Variable expenses:
Variable cost of goods sold	$21,200.00	$400.00	F	$21,600.00
Variable S&A	$5,500.00	$100.00	U	$5,400.00
Total Variable Expenses	$26,700.00	$300.00	F	$27,000.00
Contribution margin	$14,300.00	$800.00	F	$13,500.00
Fixed Expenses:
Fixed Cost of goods sold	$4,200.00	$200.00	U	$4,000.00
Fixed S&A	$2,900.00	$100.00	F	$3,000.00
Total Fixed Expenses	$7,100.00	$100.00	U	$7,000.00
Net Operating Income	$7,200.00	$700.00	F	$6,500.00