Question

Phone Technologies manufactures capacitors for cellular base stations and other communications applications. The​ company's July 2018 flexible budget shows output levels of 6,500​, 8,000​, and 10,000 units. The static budget was based on expected sales of 8,000 units. The company sold 10,000 units during July. Its flexible budget and actual operating income was as​ follows:

i Data Table Phone Technologies Flexible Budget For the Month Ended July 31, 2018 Budget Amount per Unit Units R 255 12 6,500 162,500 $ 78,000 8,000 200,000 $ 96,000 10,000 250,000 120,000 Sales Revenue Variable Expenses Contribution Margin Fixed Expenses Operating Income 84,500 50,000 34,500 $ 104,000 50,000 54,000 $ 130,000 50,000 80,000 $

Answer 1

Solution:

Phone Technologies
Flexible Budget Performance Report
For the month ended July 31, 2018
Particulars	Budgeted amount per unit	Actual results	Flexible Budget Variance		Flexible Budget	Sales volume variance		Planning Budget
Units		10000			10000			8000
Sales revenue	$25.00	$257,000.00	$7,000.00	F	$250,000.00	$50,000.00	F	$200,000.00
Variable Expenses	$12.00	$125,000.00	$5,000.00	U	$120,000.00	$24,000.00	U	$96,000.00
Contribution margin	$13.00	$132,000.00	$2,000.00	F	$130,000.00	$26,000.00	F	$104,000.00
Fixed expenses		$51,000.00	$1,000.00	U	$50,000.00	$0.00	U	$50,000.00
Net operating income		$81,000.00	$1,000.00	F	$80,000.00	$26,000.00	F	$54,000.00