question archive Fixed Budgets, Flexible Budgets and the Flexible Budget Performance Report: Jam J reports the following information for May 2020

Fixed Budgets, Flexible Budgets and the Flexible Budget Performance Report: Jam J reports the following information for May 2020

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Fixed Budgets, Flexible Budgets and the Flexible Budget Performance Report: Jam J reports the following information for May 2020. Sales price Variable Costs Fixed Costs (total) Units produced and sold Budgeted $55 per unit $18 per unit $288,000 12,000 Actual $750,850 $240,300 $290,000 13,500 1. Prepare a flexible budget for May 2020 at the following levels of activity: 10,000 units; 12,000 units; 14,000 units; 16,000 units. 2. Prepare a 'Flexible Budget Performance Report' for May 2020 at the actual level of activity of 13,500 units, showing variances between the flexible budget (@13,500 units) and actual results at 13,500 units. List variable and fixed expenses separately, and indicate variances as favorable (F) or unfavorable (U). 3. Calculate the Sales Price Variance for May 2020.

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Requirement 1)

Particular

10000 units

12000 units

14000 units

16000 units

Sales revenue

550000

660000

770000

880000

Less: variable cost

180000

216000

252000

288000

Contribution margin

370000

444000

518000

592000

Less: fixed cost

288000

288000

288000

288000

Net income

82000

156000

230000

304000

Requirement 2)

Particular

Actual Result

Budgeted Result

Flexible variance

 

Sales revenue

750850

742500

8350

F

Less: variable cost

240300

243000

2700

F

Contribution margin

510550

499500

11050

F

Less: fixed cost

290000

288000

2000

U

Net income

220550

211500

9050

F

Requirement 3)

Sales Price Variance = Actual Sales Revenue– Actual Sales at Budgeted Price

Sales Price Variance = 750,850 – (13,500 x 55)

Sales Price Variance = 750,850 – 742,500

Sales Price Variance = 8,350 Favourable