question archive 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.
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