Question

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​Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the​ customer's bank. The​ company's operating budget for September

20172017

included these​ data:

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​(Click the icon to view the operating budget and actual​ results.)

The executive vice president of the company observed that the operating income for September was much lower than​ anticipated, despite a​ higher-than-budgeted selling price and a​ lower-than-budgeted variable cost per unit. As the​ company's management​ accountant, you have been asked to provide explanations for the disappointing September results.

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develops its flexible budget on the basis of budgeted​ per-output-unit revenue and​ per-output-unit variable costs without detailed analysis of budgeted inputs.

Read the requirements

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Answer 1

Unit sold Revenues Variable costs Contribution margin Fixed costs Operating Income (loss) Actual Results | Static - Budget Variance [A] 1 [A-B] 10,200 2,800U 214,200 $ 45,800 61,200 29,800F $ 153,000 $ 16,000 151,000 6,000 U 2,000 $ 22,000U Static Budget [B] 13,000 $ 260,000 91,000 169,000 145,000 24,000 Working Notes Actual Result Revenues (10,200 x $ 21) Variable cost (10,200 x $ 6) Static Budget Revenues (13,000 x $ 20) Variable cost (13,200 x $ 7) 214,200 61,200 260,000 91,000

Units sold Revenues Variable costs Contribution margin Fixed costs Operating Income (loss) Actual Results Flexible-Budget Variance Flexible Budget | [A] [A-B] [B] 10,200 None 10,200 214,200 $ 10,200 F 204,000 $ 61,200 10,200F 71,400 $ 153,000 $ 20,400F 132,600 $ 151,000 6,000U 145,000 2,000$ 14,400 F (12,400) $ Sales-Volume Variance [B-C] 2,800U 56,000 U 19,600 36,400 U -_ None 36,400U Static Budget [C] 13,000 260,000 91,000 $ 169,000 145,000 $ 24,000 IS Working Notes Flexible Budget Revenues (10,200 x $ 20) Variable cost (10,200 x $ 7) 204,000 71,400 3) The flexible-budget breaks down the static-budget variance. This allows the managers to see the portion of the variance that arose because sales price and costs were either higher or lower than expected, as shown in the flexible-budget variance column, and the portion of the variance that arose because the sales volume was different than expected, as shown in the Sales-Volume Variance column. The primary reason for unfavorable static-budget variance is the decrease in unit volume. One explanation for this change is the increase in the actual selling price from the budgeted price. Variable costs decreased relative to the flexible budget, which could be due to efficient management or using lower quality materials. Notes Unfavorable variance = "U" Favorable variance = "F"