Question

Top managers of White Industries predicted 2018 sales of 14,700 units of its product at a unit price of $6.00. Actual sales for the year were 14,200 units at $11.50 each. Variable costs were budgeted at $2.80 per unit, and achual variable costs were $2.90 per unit Actual fixed costs of $50,000 exceeded budgeted foxed costs by $4,500 Prepare White's Bexible budget performance report. What variance contributed most to the year's tavorable results? What caused this variance? Prepare a flexible budget performance report for the year. First, complete the lexible budget performance report through the contribution margin line, then complete the report through the operating income line. Finally, compute the total variances. (Enter a "0" for any zero balances. For any $0 variances, leave the Favorable (FUnfavorable (U) input blank) White Industries Flexible Budget Performance Report For the Year Ended December 31, 2018 5 4 21 3 (3)- (5) (1) (3) Flexible Sales Budget Static Volume Budget Flexible Actual Amounts Variance Budget Budget Variance Results Per Unit Units Sales Revenue Variable Costs Contribution Margin Foxed Costs Operating Income Choose from any list or enter any number in the input fields and then continue to the next question OOO00

Answer 1

Flexible Budget Performance report is shown as follows:- (Amounts in $)

White Industries
Flexible Budget Performance Report
For the Year Ended December 31, 2018
		1	2 (1-3)	3	4 (3-5)	5
	Budget Amounts Per Unit	Actual Results	Flexible Budget Variance	Flexible Budget	Sales Volume Variances	Static Budget
Units		14,200		14,200		14,700
Sales Revenue (A)	6.00	163,300 (14,200*11.5)	78,100 F	85,200 (14,200*6)	3,000 U	88,200 (14,700*6)
Variable Costs (B)	2.80	41,180 (14,200*2.9)	1,420 U	39,760 (14,200*2.8)	1,400 F	41,160 (14,700*2.8)
Contribution Margin (C = A-B)		122,120	76,680 F	45,440	1,600 U	47,040
Fixed Costs (D)		50,000	4,500 U	45,500 (50,000-4,500)	0	45,500
Operating Income (C-D)		72,120	72,180 F	(60)	1,600 U	1,540
		Flexible Budget Variance			Sales Volume Variance
		72,180 F			1,600 U
		Static Budget Variance 70,580 F (72,180-1,600)

The favorable flexible budget variance for sales revenue (i.e. $78,100) contributed most to the year's favorable results. It is due to difference between budgeted selling price and actual selling price (i.e. $11.50 - $6.00). The actual selling price is more than budgeted selling price by $5.50 per unit which results in favorable sales volume variance.