Question

You have been provided with the following Operating statementfor Burdon Co plc: BudgetActual Sales400,000468,000 Cost of sales255,000293,000 145,000175,000 Selling and Adm95,000105,000 NETPROFIT50,00070,000 Output(units)400,000460,000 COST OF SALES Direct Materials115,000135,000 Directlabour80,00088,000 Direct expenses60,00070,000 225,000293,000 Selling and administration Sellingexpenses45,00054,000 Administrationexp50,00051,000 95,000105,000 You are given the following info: a. material and labour cost vary in direct proportion to output b. factory expenses are treated 30% fixed and 70% variable c. Selling expenses are treated 20% fixede and 80% variable d. administration expenses are fixed e. Sales turnover figures are based on selling price of €1per unit. Prepare a flexible budget covering the level of output of 460,000 units and compute the variances

Answer 1

Burdon Co Plc. Flexible Budget Performance Report
	Flexible Budget	Actual Results	Variances
Output level	460,000 units	460,000 units
Sales	460,000	468,000	8,000 F
Cost of Sales
Direct materials ( 115,000 / 400,000 ) * 460,000	132,250	135,000	2,750 U
Direct labor ( 80,000 / 400,000 ) * 460,000	92,000	88,000	4,000 F
Factory expenses [( 60,000 x 70 % / 400,000) * 460,000 + 18,000]	66,300	70,000	3,700 U
Total Cost of Sales	290,550	293,000	2,450 U
Gross Profit	169,450	175,000	5,550 F
Selling and Administrative Expenses
Selling expenses ( 45,000 x 80 % ) / 400,000 ) * 460,000 + 9,000	50,400	54,000	3,600 U
Administrative Expenses	50,000	51,000	1,000 U
Total Selling and Administrative Expenses	100,400	105,000	4,600 U
Net Profit	69,050	70,000	950 F