Question

1. Prepare a flexible budget and a variance analysis. (Please explain how to derive the results)
   REAL FLEXIBLE VARIATION Units Sales 14,000 686,000 14,000 672,000 Direct Materials Direct Labor Indirect Labor Idle Time Clean up time Miscellaneous Supplies 108.000 288.000 57.600 14.400 10.800 5.200 14,000 49 48 0289 Variable Manufacturing costs Variable Shipping Costs 28.800 1.6 Direct Materials Direct Labor Indirect Labor Idle Time Clean up time Miscellaneous Supplies 85,400 246,000 44,400 14,200 10,000 4,000 -85,400 -246,000 44,400 -14,200 -10,000 4,000 Total Variable Manufacturing Costs 404,000 404,000 Variable Shipping Costs 28,000 -28,000 Total Variable Costs 432,000 432,000 Contribution Margin 254,000 -254,000 NonVariable Manufacturing Costs #VALUE! Supervision Rent Depreciation Other 58,800 20,000 60,000 10,400 #VALUE! #VALUE! Total Non Variable Manuf. Costs 149,200 -149,200 Selling and Administrative Costs 112,000 #VALUE! Total non variable and programmed costs 261,200 #VALUE! Operating Income (Loss) -7,200 #VALUE!
   

Answer 1

Flexible Budget - In contrast to Fixed Budget and as name suggests, number of units is flexible in Flexible budget. For the actual number of units produced and sold, budgeted rate per unit gets applied and variance will be arrived at.

Attached table presents the flexible budget and appropriate variance analysis. With regard to non variable manufacturing cost, budgeted figures are not available in the image provided and thus not updated. Non-variable Expense budgeted figures will not change as per actual units produced and sold and it remains constant as budgeted.

Variance Variance Analysis Flexible 14,000.00 Units Actual 14,000.00 Per unit (Total / 14000 Total (As units) given) Per unit (as given) Total (per unit * 14000 units) Price per unit is more at actuals as against budgeted. Reason 1) Good negotation skill of management Sales 49.00 686,000.00 48.00 672,000.00 14,000.00 Favorable Direct Material Direct Labor Indirect Labor Idle Time Clean up time Miscellaneous supplies Total Variable Manufacturing cost H=SUM(B:G) Variable Shipping cost Total Variable Cost J=H+I Contribution Margin K=A-) 6.10 17.57 3.17 1.01 0.71 0.29 85,400.00 246,000.00 44,400.00 14,200.00 10,000.00 4,000.00 404,000.00 28,000.00 432,000.00 254,000.00 6.00 16.00 3.20 0.80 0.60 0.29 84,000.00 224,000.00 44,800.00 11,200.00 8,400.00 4,046.00 376,446.00 22,400.00 398,846.00 273,154.00 1,400.00 Unfavorable 22,000.00 Unfavorable -400.00 Favorable 3,000.00 Unfavorable Unfavorable - price per unit is more at 1,600.00 Unfavorable actuals as against budgeted; Reason could -46.00 Favorable be 1) higher quality product purchased. 2) 27,554.00 highly skilled labor utilized 3) No enough 5,600.00 Unfavorable negotiation to get material or labor at 33,154.00 lesser cost -19,154.00 2.00 1.60