Question

e. How much of the master budget variance for Commissions Exp. was caused by an unanticipated increase in volume?__________________ F or U?

f. How much of the master budget variance for Advertising Expenses was caused by an unanticipated increase in volume?__________________ F or U?

g. How much of the master budget variance for CGS was caused by some factor other than volume? (Hint: this is NOT a manufacturing business). $__________ F or U? What could account for this variance?

h. How much of the master budget variance for Sales Revenue was caused by some factor other than volume? $__________ F or U? What could account for this variance?

Flexible Budget Performanc Actual Flexible Budger Master Budget Volume 21460 21460 20000 Sales Revenue 1131020 1073000 1000000 Less: Variable Expense COGS 682880 643800 600000 Sales Commission 58685 53650 50000 44213 Shipping Expenses Bad debt Expense 42920 40000 16930 9657 9000 328312 Contribution 322973 301000 Less: Fixed Cost 43000 40000 Salaries 40000 Lease on Dost Center 15500 17000 17000 12000 12000 12000 Deprec on equipment Advertising Office Rent, phone 7750 10000 10000 12300 11000 11000 232973 Operating Income 237762 211000

Answer 1

Volume variance is the variance arised due to change in volumes hence it is the difference between the Flexible budget and Master Budget.

e). Master budget variance for Commissions Exp. = Master budget commission exp. - Flexible budget commission exp.
= $50,000 - $53,650
= $3,650 U

f). Master budget variance for Advertising Expenses = Master budget advertising exp. - Flexible budget advertising exp.
= $10,000 - $10,000
= $0, So there is no variance

g). Variance other than volume is spending variance means variance resulting by change in prices hence it is difference between the flexible budget and actual results.
Variance = Fexible budget COGS - Actual COGS
= $643,800 - $682,880
= $39,080 U
Here the difference is due to different Cost per unit.

h). Sales revenue variance = Actual Sales revenue - Fexible budget Sales revenue
= $1,131,020 - $1,073,000
= $58,020 F
Here the difference is due to different selling price.