Flexible Budgets and the Breakdown of the Total Operating Income Variance Assumethat in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold950 units for $835 each. During this month, the company incurred $475,000 total variable costsand $180,000 total fixed costs. The master (static) budget data for the month are as given inExhibit 14.1.Required (Round all your answers to the nearest whole number): 1. Prepare a flexible budget for the production and sale of 950 units.2. Compute for October 2019: a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U). b. The sales volume variance, in terms of contribution margin. Indicate whether this variance wasfavorable (F) or unfavorable (U). 3. Compute for October 2019:a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) orunfavorable (U). c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F)or unfavorable (U). d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U).
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.
Flexible Budgets and the Breakdown of the Total Operating Income Variance Assume
that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold
950 units for $835 each. During this month, the company incurred $475,000 total variable costs
and $180,000 total fixed costs. The
Exhibit 14.1.
Required (Round all your answers to the nearest whole number):
1. Prepare a flexible budget for the production and sale of 950 units.
2. Compute for October 2019:
a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U).
b. The sales volume variance, in terms of contribution margin. Indicate whether this variance was
favorable (F) or unfavorable (U).
3. Compute for October 2019:
a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U).
b. The total variable cost flexible-
unfavorable (U).
c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F)
or unfavorable (U).
d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U).
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