Master (Static) Budget Variance and Its Components As the new accountant for Cohen &Co., you have been asked to provide a succinct analysis of financial performance for the year justended. You obtain the following information that pertains to the company’s sole product:Actual Master (Static) BudgetUnits sold 40,000 45,000Sales $380,000 $450,000Variable costs 210,000 270,000Fixed costs 145,000 135,000Required1. What was the actual operating income for the period? Show calculations; round your answer to the nearest whole dollar.2. What was the company’s master (static) budget operating income for the period? Show calculations, andround your answer to the nearest whole dollar.3. (a) What was the total master (static) budget variance, in terms of operating income, for the period(rounded to nearest whole dollar)? (b) Is this variance favorable (F) or unfavorable (U)? Why? (Note:The total master (static) budget variance is also referred to as the total operating income variance for theperiod.)4. The total master (static) budget variance for a period can be decomposed into a total flexible-budgetvariance and a sales volume variance. (a) What was (to the nearest whole dollar) the total flexiblebudget variance for the period? (b) Was this variance favorable (F) or unfavorable (U)? (c) What was thesales volume variance (to the nearest whole dollar) for the period? (d) Was this variance favorable (F) orunfavorable (U)? 5. Define the meaning of the total flexible-budget variance and the sales volume variance.
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.
Co., you have been asked to provide a succinct analysis of financial performance for the year just
ended. You obtain the following information that pertains to the company’s sole product:
Actual Master (Static) Budget
Units sold 40,000 45,000
Sales $380,000 $450,000
Variable costs 210,000 270,000
Fixed costs 145,000 135,000
Required
1. What was the actual operating income for the period? Show calculations; round your answer to the nearest whole dollar.
2. What was the company’s master (static) budget operating income for the period? Show calculations, and
round your answer to the nearest whole dollar.
3. (a) What was the total master (static) budget variance, in terms of operating income, for the period
(rounded to nearest whole dollar)? (b) Is this variance favorable (F) or unfavorable (U)? Why? (Note:
The total master (static) budget variance is also referred to as the total operating income variance for the
period.)
4. The total master (static) budget variance for a period can be decomposed into a total flexible-budget
variance and a sales volume variance. (a) What was (to the nearest whole dollar) the total flexiblebudget variance for the period? (b) Was this variance favorable (F) or unfavorable (U)? (c) What was the
sales volume variance (to the nearest whole dollar) for the period? (d) Was this variance favorable (F) or
unfavorable (U)?
5. Define the meaning of the total flexible-budget variance and the sales volume variance.
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