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Crafting Inc., produces craft kits used for birthday parties and other kids' events. The company's static budget income statement for March is as follows. It is based on expected sales volume of 20,000 craft kits. Sales Revenue Crafting Inc. Static Budget Income Statement Month Ended March 31 $ 80,000

Crafting Inc., produces craft kits used for birthday parties and other kids' events. The company's static budget income statement for March is as follows. It is based on expected sales volume of 20,000 craft kits. Sales Revenue Crafting Inc. Static Budget Income Statement Month Ended March 31 $ 80,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Crafting Inc., produces craft kits used for birthday parties and other kids' events. The company's static budget income statement for March is as follows. It is based on expected sales volume of 20,000 craft kits. Sales Revenue Variable Expenses: Fixed Expenses: Total Expenses Operating Income Crafting Inc. Static Budget Income Statement Month Ended March 31 Part 1 Cost of goods sold Sales Commissions Utilities expenses Salary expense Depreciation Expense Rent expense Utilities expenses $ 555 $ $ $ $ SSSSSS $ $ $ $ $ 80,000 20,000 5,000 3,000 18,000 4,000 5,000 2,000 57,000 23,000 Crafting Inc's plant capacity is 25,000 kits. If actual volume exceeds 25,000 kits, the company must expand the plant. In that case, salaries will increase by 5%, depreciation by 10%, and rent by $2,000. Fixed utilities will be unchanged by any volume increase. 1) Prepare flexible budget income statements for the company, showing output levels of 20,000, 24,000, and 28,000 kits.
Transcribed Image Text:Crafting Inc., produces craft kits used for birthday parties and other kids' events. The company's static budget income statement for March is as follows. It is based on expected sales volume of 20,000 craft kits. Sales Revenue Variable Expenses: Fixed Expenses: Total Expenses Operating Income Crafting Inc. Static Budget Income Statement Month Ended March 31 Part 1 Cost of goods sold Sales Commissions Utilities expenses Salary expense Depreciation Expense Rent expense Utilities expenses $ 555 $ $ $ $ SSSSSS $ $ $ $ $ 80,000 20,000 5,000 3,000 18,000 4,000 5,000 2,000 57,000 23,000 Crafting Inc's plant capacity is 25,000 kits. If actual volume exceeds 25,000 kits, the company must expand the plant. In that case, salaries will increase by 5%, depreciation by 10%, and rent by $2,000. Fixed utilities will be unchanged by any volume increase. 1) Prepare flexible budget income statements for the company, showing output levels of 20,000, 24,000, and 28,000 kits.
Part 2 Refer to the data in Part 1. The company sold 23,000 craft kits during March, and its actual operating income was as follows: Sales Revenue Variable Expenses: Fixed Expenses: Total Expenses Operating Income Crafting Inc. Income Statement Month Ended March 31 Cost of goods sold Sales Commissions Utilities expenses Salary expense Depreciation Expense Rent expense Utilities expenses $ $ $ $ $ $ $ 97,750 22,000 5,500 3,600 19,000 4,000 5,000 2,200 61,300 36,450 Requirements: 1) Prepare an income statement performance report for August. 2) What accounts for most of the difference between actual operating income and static budget operating income?
Transcribed Image Text:Part 2 Refer to the data in Part 1. The company sold 23,000 craft kits during March, and its actual operating income was as follows: Sales Revenue Variable Expenses: Fixed Expenses: Total Expenses Operating Income Crafting Inc. Income Statement Month Ended March 31 Cost of goods sold Sales Commissions Utilities expenses Salary expense Depreciation Expense Rent expense Utilities expenses $ $ $ $ $ $ $ 97,750 22,000 5,500 3,600 19,000 4,000 5,000 2,200 61,300 36,450 Requirements: 1) Prepare an income statement performance report for August. 2) What accounts for most of the difference between actual operating income and static budget operating income?
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