Question

Bluebird Entertainment Corporation manufactures and sells video games. Their master budget for the month of November was based on productiorn and sales of 150,000 games. The budget is based on the average selling price and variable cost per video game-e , video game is cost driver for all variable costs).Although they produce and sell various games, once they are designed production costs are essentially the same. The selling price per game varies between $14 and $18, with an average selling price of $16. The budgeted income statement for November is as follows. $2.400,000 5 Revenue 6 Variable expenses Direct materials Direct labor $675,000 300,000 9 Variable overhead 10Total variable expenses 11Contribution margin 12 Fixed overhead 13 Fixed selling and administrative expenses 14 Total fixed expenses 975,000 250,000 500.000 750.000 $225,000 15 Operating income 17 During November, Bluebird produced and sold 180,000 games. Actual results for the month are as follows 19 Revenue 16 18 $2,870,000 20 Variable expenses 21 22 Direct labor 23 Variable overhead 24 Total variable expenses 25 Contribution margin 26 Fixed overhead 27 Fixed selling and administrative expenses 28 Total fixed expenses $798,000 375,000 550.000 Direct materials 1723000 1,147.000 270,000 770,000 $377,000 29 Operating income 30 31 flexible budget cost allocations+ Ready

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