CELL ONE TECHNOLOGIES Flexible Budget For the Month Ended July 31, 2018 Budget Amounts per Unit Units 8,500 10,000 12,000 Sales Revenue $24 $ 204,000 $240,000 $ 288,000 Variable Expenses 13 110,500 130,000 156,000 Contribution Margin 93,500 110,000 132,000 Fixed Expenses 57,000 57,000 57,000 Operating Income $ 36,500 S 53,000 $ 75,000 CELL ONE TECHNOLOGIES Income Statement For the Month Ended July 31, 2018 Sales Revenue $ 295,000 Variable Expenses Contributions Margin 161,100 133,900 Fixed Expenses 58,000 Operating Income $ 75,900
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.
Preparing a flexible budget performance report
Cell Plus Technologies manufactures capacitors for cellular base stations and other communication applications. The company’s July 2018 flexible budget shows output levels of 8,500, 10,000, and 12,000 units. The static budget was based on expected sales of 10,000 units.
The company sold 12,000 units during July, and its actual operating income was as follows:
Requirements
- Prepare a flexible budget performance report for July 2018.
- What was the effect on Cell Plus’s operating income of selling 2,000 units more than the static budget level of sales?
- What is Cell Plus’s static
budget variance for operating income? - Explain why the flexible budget performance report provides more useful information to Cell Plus’s managers than the simple static budget variance. What insights can Cell Plus’s managers draw from this performance report.
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