Given the following information: Prior Year (Budget) Prior Year (Actual) Current Year (Budget) Current Year (Actual) Beginning Inventory (Units) 0 0 ? ? Sales (Units)
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.
Given the following information:
|
|
Prior Year (Budget) |
Prior Year (Actual) |
Current Year (Budget) |
Current Year (Actual) |
|
Beginning Inventory (Units) |
0 |
0 |
? |
? |
|
Sales (Units) |
610,000 |
570,000 |
582,000 |
590,000 |
|
Manufactured (Units) |
600,000 |
590,000 |
640,000 |
610,000 |
|
Selling Price ($/unit) |
9.99 |
9.90 |
9.95 |
10.10 |
|
Variable Manufacturing Cost ($/unit) |
4.93 |
4.93 |
4.96 |
4.96 |
|
Total Fixed |
1,584,000 |
1,561,000 |
1,664,000 |
1,599,531 |
|
Variable Selling Cost ($/unit) |
1.00 |
1.02 |
0.99 |
1.01 |
|
Total Fixed SG&A Costs ($) |
360,000 |
363,000 |
356,850 |
348,000 |
Other information:
The manufacturer uses FIFO (this is to make is easier to solve – weighted average would be a lot more difficult to solve)
The manufacturer uses
Required:
Prepare an income statement for the Current Year based on Variable Costing.
Prepare an income statement for the Current Year based on Absorption Costing.
Prepare a T-account that for Fixed Manufacturing
Reconcile the difference in Net Income between Variable Costing and Absorption Costing for the current year. (hint: compare this difference in income to the differences in ending inventory for Absorption Costing and Variable Costing).
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