Question

Prepare a flexible budget performance report (Learning Objective 5)

Main Street Muffins sells its muffins to restaurants and coffee houses for an average selling price of $26 per case. The following information relates to the budget for Main Street Muffins for this year (all figures are annual totals unless otherwise noted):

Budgeted sales in cases	9,100 cases
Packaging cost per case	$  1
Shipping expense per case	$  2
Sales commission expense	5% of sales price
Salaries expense	$6,500
Office rent	$3,900
Depreciation	$2,500
Insurance expense	$1,800
Office supplies expense	$ 900

During the year, Main Street Muffins actually sold 9,500 cases, resulting in total sales revenue of $255,200. Actual expenses (in total) from this year are as follows:

Packaging cost	$ 10,600
Shipping expense	$ 19,500
Sales commission expense	$ 12,760
Salaries expense	$ 7,300
Office rent	$ 3,900
Depreciation	$ 2,500
Insurance expense	$ 1,600
Office supplies expense	$ 1,600

Requirement

Construct a flexible budget performance report for Main Street Muffins for the year. Be sure to indicate whether each variance is favorable (F) or unfavorable (U).

Answer 1

Solution:

Main Street Muffins
Flexible Budget Performance Report
For the year
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Nos of units sold	9500			9500			9100
Revenue	$255,200.00	$8,200.00	F	$247,000.00	$10,400.00	F	$236,600.00
Expenses:
Packaging cost	$10,600.00	$1,100.00	U	$9,500.00	$400.00	U	$9,100.00
Shipping Expense	$19,500.00	$500.00	U	$19,000.00	$800.00	U	$18,200.00
Sales commission expense	$12,760.00	$410.00	U	$12,350.00	$520.00	U	$11,830.00
Salaries expense	$7,300.00	$800.00	U	$6,500.00	$0.00	None	$6,500.00
Office rent	$3,900.00	$0.00	None	$3,900.00	$0.00	None	$3,900.00
Depreciation	$2,500.00	$0.00	None	$2,500.00	$0.00	None	$2,500.00
Insurance expense	$1,600.00	$200.00	F	$1,800.00	$0.00	None	$1,800.00
Office supplies expense	$1,600.00	$700.00	U	$900.00	$0.00	None	$900.00
Total Expenses	$59,760.00	$3,310.00	U	$56,450.00	$1,720.00	U	$54,730.00
Net Income	$195,440.00	$4,890.00	F	$190,550.00	$8,680.00	F	$181,870.00