Melissa Jones is manager of a production department of Seal Company. Her department makes one product; the following information for her department was accumulated for 2014: Static Budget Actual Results Number of units 100,000 91,000 Direct materials cost 400,000 350,000 Direct Labor cost 200,000 180,000 Variable manufacturing overhead 100,000 97,000 Fixed manufacturing overhead 145,000 146,000 Total $845,000 $773,000 Required: 1)Using the table below, prepare a flexible budget for the department's actual level of activity. 2) Using the table below, use the flexible budget to evaluate the performance of Ms. Jones' department. 3) Why does the budget not include sales revenue and net income? Flexible Budget Actual Results Variance Number of units Direct materials cost Direct labor cost Variable manufacturing overhead Fixed manufacturing overhead Total
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.
Melissa Jones is manager of a production department of Seal Company. Her department makes one product; the following information for her department was accumulated for 2014:
| Static Budget | Actual Results | |
| Number of units | 100,000 | 91,000 |
| Direct materials cost | 400,000 | 350,000 |
| Direct Labor cost | 200,000 | 180,000 |
| Variable manufacturing overhead | 100,000 | 97,000 |
| Fixed manufacturing overhead | 145,000 | 146,000 |
| Total | $845,000 | $773,000 |
Required:
1)Using the table below, prepare a flexible budget for the department's actual level of activity.
2) Using the table below, use the flexible budget to evaluate the performance of Ms. Jones' department.
3) Why does the budget not include sales revenue and net income?
| Flexible Budget | Actual Results | Variance | |
| Number of units | |||
| Direct materials cost | |||
| Direct labor cost | |||
| Variable manufacturing overhead | |||
| Fixed manufacturing overhead | |||
| Total |
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