n manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. They prepared the following budget for October, when they planned on selling 6,500 units. Revenue $227,500 Variable Manufacturing Costs 130,000 Fixed Manufacturing Costs 35,000 Variable Selling and Administrative Expenses 6,500 Fixed Selling and Administrative Expenses 25,000 Budgeted Operating Income $31,000 Actual results for October were:
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.
Wahlund Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. They prepared the following budget for October, when they planned on selling 6,500 units.
| Revenue |
$227,500 |
| Variable |
130,000 |
| Fixed Manufacturing Costs |
35,000 |
| Variable Selling and Administrative Expenses |
6,500 |
| Fixed Selling and Administrative Expenses |
25,000 |
| Budgeted Operating Income |
$31,000 |
Actual results for October were:
| Revenue (7,000 Units) |
$231,000 |
| Variable Manufacturing Costs |
137,000 |
| Fixed Manufacturing Costs |
36,000 |
| Variable Selling and Administrative Expenses |
7,100 |
| Fixed Selling and Administrative Expenses |
23,500 |
| Budgeted Operating Income |
$27,400 |
Prepare a Flexible Budget Performance Report (complete Flexible Budget Analysis), including the total Activity Variance, total Revenue and Spending Variance, and individual Revenue and Spending Variances. All variances must be labeled as unfavorable (U) or favorable (F). Match each of the following items to the appropriate answer. Prepare the Flexible Budget Performance Report BEFORE you attempt to answer the questions.
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