Question

Business Solutions's second-quarter 2018 fixed budget performance report for its computer furniture operations follows. The $167,240 budgeted expenses include $114,240 in variable expenses for desks and $21,000 in variable expenses for chairs, as well as $32,000 fixed expenses. The actual expenses include $33,600 fixed expenses. List fixed and variable expenses separately. Desk sales (in units) Chair sales (in units) Desk sales Chair sales Total expenses Income from operations Fixed Budget Actual Results Variances 136 142 60 68 $170,000 $176,080 $6,080 F 32,400 37,740 5,340 F 167,240 177,000 9,760 U $ 35,160 $ 36, 820 $1,660 F Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. BUSINESS SOLUTIONS Flexible Budget Performance Report For Quarter Ended June 30 Flexible Budget Actual Results Flexible Budget Actual Results Variance Fav./Unf. Desk sales Chair sales Variable expenses Contribution margin Fixed expenses Income from operations D I

Answer 1

Ans.	BUSINESS SOLUTIONS
	Flexible Budget Performance Report
	For Quarter Ended June 30
		Flexible budget	Actual results	Variances	Fav./ Unf.
	Desk sales	$177,500	$176,080	$1,420	U
	Chair sales	$36,720	$37,740	$1,020	F
	Total sales	$214,220	$213,820	$400	U
	Less: Variable cost	$143,080	$143,400	$320	U
	Contribution margin	$71,140	$70,420	$720	U
	Less: Fixed cost	$32,000	$33,600	$1,600	U
	Income from operations	$39,140	$36,820	$2,320	U
	*Calculations:
	Actual variable expenses = Actual total expenses - Actual fixed expenses
	$177,000 - $33,600   =   $143,400
	*Flexible budget is prepared on the basis of actual units.
	Flexible budget sales = Fixed budget sales / Budgeted sales units * Actual sales units
	Desk sales	$170,000 / 136 * 142	$177,500
	Chair sales	$32,400 / 60 * 68	$36,720
	*Flexible budget fixed expenses = Fixed budget fixed expenses = $32,000
	Flexible budget variable expenses = Fixed budget variable expenses / Budgeted sales units * Actual sales units
	Desk sales	$114,240 / 136 * 142	$119,280
	Chair sales	$21,000 / 60 * 68	$23,800
	Total Variable Expenses		$143,080
	*Fixed expenses in flexible budget remain same as fixed budget.
	Spending variance   =   Actual results - Flexible budget
	*Increase in expenses & decrease in sales, contribution margin or net income from flexible budget to actual results =   Unfavorable.
	*Decrease in expenses & increase in sales, contribution margin or net income from flexible budget to actual results =   Favorable.