Duo, Inc., carries two products and has the following year-end income statement (000s omitted): Product AR-10 Product ZR-7 Budget Actual Budget Actual Units 3,100 4,300 8,200 7,600 Sales $ $ 18,600 $ 11,610 $ 16,400 $ 15,960 Variable costs 3,100 4,300 8,200 7,980 Fixed Costs 1,800 1,900 2,400 2,400 Total Costs $ 4,900 $ 6,200 $ 10,600 $ 10,380 Operating income $ 13,700 $ 5,410 $ 5,800 $ 5,580 The net effect of ZR-7's selling price variance on profit is: Multiple Choice $580 unfavorable. $1,160 unfavorable. $330 favorable. $600 unfavorable. $760 favorable.
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.
Duo, Inc., carries two products and has the following year-end income statement (000s omitted):
| Product |
Product ZR-7 | |||||||||||||||
| Budget | Actual | Budget | Actual | |||||||||||||
| Units | 3,100 | 4,300 | 8,200 | 7,600 | ||||||||||||
| Sales $ | $ | 18,600 | $ | 11,610 | $ | 16,400 | $ | 15,960 | ||||||||
| Variable costs | 3,100 | 4,300 | 8,200 | 7,980 | ||||||||||||
| Fixed Costs | 1,800 | 1,900 | 2,400 | 2,400 | ||||||||||||
| Total Costs | $ | 4,900 | $ | 6,200 | $ | 10,600 | $ | 10,380 | ||||||||
| Operating income | $ | 13,700 | $ | 5,410 | $ | 5,800 | $ | 5,580 | ||||||||
The net effect of ZR-7's selling price variance on profit is:
-
$580 unfavorable.
-
$1,160 unfavorable.
-
$330 favorable.
-
$600 unfavorable.
-
$760 favorable.
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