Bellaton Industries is a manufacturing company located in Europe that has just completed the first month of a new fiscal year. The Finance Department is reviewing the variances of actual results to the master budget. The expenditures within the Marketing and Facilities departments make up the majority of the fixed costs. The Sales Operations Department is responsible for revenue. The actual results and master budget are shown below. Bellaton Budget Actual Master Budget Units sold 18,000 16,000 Revenues 1,512,000 1,360,000 Variable Costs Direct materials (792,000) (672,000) Direct labor (252,000) (240,000) Variable overhead (144,000) (128,000) Contribution margin 324,000 320,000 Fixed costs (210,000) (215,000) Operating Income 114,000 105,00 Question 1. Prepare a flexible budget based on the actual sales volume. (Negative amounts should be indicated with minus sign.) Budget Units Sold Revenues Variable Costs Direct Material Direct Labor Var. Overhead Cont. Margin Fixed Costs Operating Income Question 2. Calculate the flexible-budget variance by comparing actual results to the flexible budget. (Negative amounts should be indicated with minus sign.) Budget Actual Results Flexible Budget Variances (Amount) (U or F) Units Sold Revenues Variable Costs Direct Material Direct Labor Var. Overhead Cont. margin Fixed costs Operating Income Question 3: Explain the significance of these variances. Question 4: Identify and describe three benefits of measuring performance by comparing actual results to the master budget. Question 5: Identify and describe one limitation of measuring performance by comparing actual results to the master budget. Question 6: Identify and describe the different types of responsibility centers. Question 7: Identify the responsibility centers in the scenario. Question 8: Explain the difference between the sales-volume variance for operating income and the sales-price variance.

Bellaton Industries is a manufacturing company located in Europe that has just completed the first month of a new fiscal year. The Finance Department is reviewing the variances of actual results to the master budget. The expenditures within the Marketing and Facilities departments make up the majority of the fixed costs. The Sales Operations Department is responsible for revenue. The actual results and master budget are shown below. Bellaton Budget Actual Master Budget Units sold 18,000 16,000 Revenues 1,512,000 1,360,000 Variable Costs Direct materials (792,000) (672,000) Direct labor (252,000) (240,000) Variable overhead (144,000) (128,000) Contribution margin 324,000 320,000 Fixed costs (210,000) (215,000) Operating Income 114,000 105,00 Question 1. Prepare a flexible budget based on the actual sales volume. (Negative amounts should be indicated with minus sign.) Budget Units Sold Revenues Variable Costs Direct Material Direct Labor Var. Overhead Cont. Margin Fixed Costs Operating Income Question 2. Calculate the flexible-budget variance by comparing actual results to the flexible budget. (Negative amounts should be indicated with minus sign.) Budget Actual Results Flexible Budget Variances (Amount) (U or F) Units Sold Revenues Variable Costs Direct Material Direct Labor Var. Overhead Cont. margin Fixed costs Operating Income Question 3: Explain the significance of these variances. Question 4: Identify and describe three benefits of measuring performance by comparing actual results to the master budget. Question 5: Identify and describe one limitation of measuring performance by comparing actual results to the master budget. Question 6: Identify and describe the different types of responsibility centers. Question 7: Identify the responsibility centers in the scenario. Question 8: Explain the difference between the sales-volume variance for operating income and the sales-price variance.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 4PB

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Related questions

Question

Bellaton Budget

	Actual	Master Budget
Units sold	18,000	16,000
Revenues	1,512,000	1,360,000
Variable Costs
Direct materials	(792,000)	(672,000)
Direct labor	(252,000)	(240,000)
Variable overhead	(144,000)	(128,000)
Contribution margin	324,000	320,000
Fixed costs	(210,000)	(215,000)
Operating Income	114,000	105,00

Question 1. Prepare a flexible budget based on the actual sales volume. (Negative amounts should be indicated with minus sign.)

Budget


Units Sold
Revenues
Variable Costs
Direct Material
Direct Labor
Var. Overhead
Cont. Margin
Fixed Costs
Operating Income

Question 2. Calculate the flexible-budget variance by comparing actual results to the flexible budget. (Negative amounts should be indicated with minus sign.)

Budget

Actual Results	Flexible Budget	Variances (Amount)	(U or F)
Units Sold
Revenues
Variable Costs
Direct Material
Direct Labor
Var. Overhead
Cont. margin
Fixed costs
Operating Income

Question 3: Explain the significance of these variances.

Question 4: Identify and describe three benefits of measuring performance by comparing actual results to the master budget.

Question 5: Identify and describe one limitation of measuring performance by comparing actual results to the master budget.

Question 6: Identify and describe the different types of responsibility centers.

Question 7: Identify the responsibility centers in the scenario.

Question 8: Explain the difference between the sales-volume variance for operating income and the sales-price variance.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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