Brabham Enterprises manufactures tires for the Formula I motor racing circuit. For August 2020, it budgeted to manufacture and sell 3,000 tires at a variable cost of $73 per tire and total fixed costs of $57,000. The budgeted selling price was $111 per tire. Actual results in August 2020 were 2,700 tires manufactured and sold at a selling price of $113 per tire. The actual total variable costs were $218,700, and the actual total fixed costs were $53,500. Requirement 1. Prepare a performance report with a flexible budget and a static budget. Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable. (For variances with a $0 balance, make sure to enter "O" in the appropriate field. If the variance is zero, do not select a label.) Actual Results Flexible-Budget Variances Flexible Sales-Volume Static Budget 2700 2700 Variances -300 U Budget 3000 Units sold Revenues 305100 5400 F -33300 U 333000 218700 21600 U -21900 F 219000 Variable costs Contribution margin 86400 -16200| |U -11400 U 114000 53500 Fixed costs -3500 F OF 57000 32900 -12700 45600 -11400 57000 Operating income U U Requirement 2. Comment on the results in requirement 1. The total static-budget variance in operating income is variance and a(n) unfavorable manufactured and sold were primarily to the less decrease 57000 F. There is a(n) favorable total flexible-budget sales-volume variance. The sales-volume variance arises solely because actual units than the budgeted 3,000 units. The flexible-budget variance in operating income is due in unit variable costs. Requirements 1. Prepare a performance report with a flexible budget and a static budget. 2. Comment on the results in requirement 1.
Brabham Enterprises manufactures tires for the Formula I motor racing circuit. For August 2020, it budgeted to manufacture and sell 3,000 tires at a variable cost of $73 per tire and total fixed costs of $57,000. The budgeted selling price was $111 per tire. Actual results in August 2020 were 2,700 tires manufactured and sold at a selling price of $113 per tire. The actual total variable costs were $218,700, and the actual total fixed costs were $53,500. Requirement 1. Prepare a performance report with a flexible budget and a static budget. Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable. (For variances with a $0 balance, make sure to enter "O" in the appropriate field. If the variance is zero, do not select a label.) Actual Results Flexible-Budget Variances Flexible Sales-Volume Static Budget 2700 2700 Variances -300 U Budget 3000 Units sold Revenues 305100 5400 F -33300 U 333000 218700 21600 U -21900 F 219000 Variable costs Contribution margin 86400 -16200| |U -11400 U 114000 53500 Fixed costs -3500 F OF 57000 32900 -12700 45600 -11400 57000 Operating income U U Requirement 2. Comment on the results in requirement 1. The total static-budget variance in operating income is variance and a(n) unfavorable manufactured and sold were primarily to the less decrease 57000 F. There is a(n) favorable total flexible-budget sales-volume variance. The sales-volume variance arises solely because actual units than the budgeted 3,000 units. The flexible-budget variance in operating income is due in unit variable costs. Requirements 1. Prepare a performance report with a flexible budget and a static budget. 2. Comment on the results in requirement 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Brabham Enterprises manufactures tires for the Formula I motor racing circuit. For August 2020, it budgeted to manufacture and
sell 3,000 tires at a variable cost of $73 per tire and total fixed costs of $57,000. The budgeted selling price was $111 per tire.
Actual results in August 2020 were 2,700 tires manufactured and sold at a selling price of $113 per tire. The actual total variable
costs were $218,700, and the actual total fixed costs were $53,500.
Requirement 1. Prepare a performance report with a flexible budget and a static budget.
Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as
favorable or unfavorable. (For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero,
do not select a label.)
Actual
Results
Flexible-Budget
Variances
Flexible
Sales-Volume
Static
Budget
2700
2700
Variances
-300 U
Budget
3000
Units sold
Revenues
305100
5400 F
-33300 U
333000
218700
Variable costs
21600 U
-21900 F
219000
Contribution margin
86400
-16200 U
-11400 U
114000
53500
Fixed costs
-3500 F
0
57000
F
32900
-12700
45600
-11400
57000
Operating income
U
U
Requirement 2. Comment on the results in requirement 1.
The total static-budget variance in operating income is
variance and a(n) unfavorable
manufactured and sold were
less
primarily to the
decrease
57000 F.
There is a(n)
favorable
total flexible-budget
sales-volume variance. The sales-volume variance arises solely because actual units
than the budgeted 3,000 units. The flexible-budget variance in operating income is due
in unit variable costs.
Requirements
1. Prepare a performance report with a flexible budget and a static budget.
2. Comment on the results in requirement 1.
-
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