Melton Enterprises manufactures tires for the Formula I motor racing circuit. For August, it budgeted to manufacture and sell 4,300 tires at a variable cost of $79 per tire and total fixed costs of $63,000. The budgeted selling price was $112 per tire. Actual results in August were 4,000 tires manufactured and sold at a selling price of $114 per tire. The actual total variable costs were $340,000, and the actual total fixed costs were $60,500 Required 1. Prepare a performance report that uses a flexible budget and a static budget. 2. Comment on the results in requirement 1.
Melton Enterprises manufactures tires for the Formula I motor racing circuit. For August, it budgeted to manufacture and sell 4,300 tires at a variable cost of $79 per tire and total fixed costs of $63,000. The budgeted selling price was $112 per tire. Actual results in August were 4,000 tires manufactured and sold at a selling price of $114 per tire. The actual total variable costs were $340,000, and the actual total fixed costs were $60,500 Required 1. Prepare a performance report that uses a flexible budget and a static budget. 2. Comment on the results in requirement 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Melton Enterprises manufactures tires for the Formula I motor racing circuit. For August, it budgeted to manufacture
and sell 4,300 tires at a variable cost of $79 per tire and total fixed costs of $63,000. The budgeted selling price was
$112 per tire. Actual results in August were 4,000 tires manufactured and sold at a selling price of $114 per tire. The
actual total variable costs were $340,000, and the actual total fixed costs were $60,500.
Required
1. Prepare a performance report that uses a flexible budget and a static budget.
2. Comment on the results in requirement 1.
Requirement 1. Prepare a performance report that uses a flexible budget and a static budget.
Begin with the actual results, and then complete the flexible budget columns and the static budget columns. Label
each variance as favourable or unfavourable. (For variances with a $0 balance, make sure to enter "0" in the
appropriate field. If the variance is zero, do not select a label. Use parentheses or a minus sign when entering an
operating loss.)
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
Actual
Results
Flexible-Budget
Variances
Flexible
Budget
Sales-Volume
Variances
Static
Budget
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