Question

James Manufacturing had the following information available for July:

Actual Results Flexible Budget Variance Flexible Budget Sales Activity Variance Master Budget

Units 13,000 ? 1,000 U ?

Sales revenue ? $ 17,300 F ? ? ?

Less:

Variable manufacturing costs $ 90,000 $ 98,000 ? $ 123,000

Variable marketing and administrative ? $ 3,000 U ? $ 3,700 F $ 39,000

Contribution margin $ 58,000 ? ? $ 6,900 U ?

What was James’s master budget contribution margin?

Answer 1

Answer:

Calculation for variable marketing and administrative expenses in flexible budget and actual results:

Flexible budgeted variable marketing expense	= Master budgeted variable marketing cost - Activity variance = $ 39,000 - $ 3,700 = $ 35,300	$35,300
Actual variable marketing cost	= Flexible budgeted variable marketing expense + Budget variance = $ 35,300 + $ 3000 =$ 38,300	$38,300

Calculation of Actual sales revenue:

• Variable manufacturing expense = $ 90,000
• Actual variable marketing cost = $ 38,300
• Contribution margin = $ 58,000

Actual Sales revenue = $ 90,000+ $ 38,300+$ 58,000 = $ 1,86,300

Calculation of Flexible budget sales revenue & so on are following:

Flexible budget sales revenue	= Actual sales revenue + Budget variance = $1,86,300 - $ 17,300 =$1,69,000	$1,69,000
Selling price per unit	= Flexible budget sales revenue / Actual sales units = $1,69,000 / 13,000 = $ 13	$ 13
Budgeted sales units	= Actual units + Activity variance = 13,000 + 1,000 = 14,000 units	14,000 units
Master budget sales revenue	= Budgeted sales units*Selling price per unit = 14,000 u * $ 13 = $ 1,82,000	$ 1,82,000

Therefore ,

the master budget contribution margin = sales revenue - variable expenses (v.manufacturing cost + v.marketing cost ) = $ 1,82,000 - $ 1,62,000( $ 1,23,000 +$ 39,000) = $ 20,000