Budget Actual
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.
Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted and actual operating results for the year just completed:
| Budget | Actual | |||||
| Unit sales | ||||||
| Product X | 22,500 | 42,000 | ||||
| Product Y | 90,000 | 80,000 | ||||
| Unit contribution margin | ||||||
| Product X | $ | 4.80 | $ | 3.90 | ||
| Product Y | $ | 13.00 | $ | 14.00 | ||
| Unit selling price | ||||||
| Product X | $ | 13.00 | $ | 14.00 | ||
| Product Y | $ | 30.00 | $ | 29.00 | ||
Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry volume for the period was 2,440,000 units. Jackson measures variances using contribution margin.
The market size variance is:
Budgeted average contribution margin = (budgeted contribution margin of X * budgeted sales of X) + ( Budgeted sales of Y * Budgeted contribution margin of Y) / Total Budgeted sales
F means Favorable
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