Nina Company prepared the following fixed budget for July using 7,640 units for budgeted sales. Actual sales were 7,340 units and actual costs are shown below. Fixed Budget For Month Ended July 31 Variable Amount per Unit Total Fixed Cost Fixed Budget (7,640 units) Actual Results (7,340 units) Sales $ 100 $ 764,000 $ 750,790 Variable costs Direct materials 35 267,400 271,840 Direct labor 15 114,600 111,700 Indirect materials 4 30,560 28,760 Sales commissions 11 84,040 79,870 Total variable costs 65 496,600 492,170 Contribution margin $ 35 $ 267,400 $ 258,620 Fixed costs Depreciation—Machinery $ 69,530 69,530 69,530 Supervisor salary 41,270 41,270 42,440 Insurance 10,210 10,210 10,210 Depreciation—Office equipment 7,540 7,540 7,540 Administrative salaries 33,900 33,900 30,360 Total fixed costs $ 162,450 162,450 160,080 Income $ 104,950 $ 98,540 Prepare a flexible budget performance report for July at activity level of 7,340 units. Show variances between budgeted and actual amounts. (Indicate the effect of each variance by selecting favorable, unfavorable, or no 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.
Exercise 21-5 (Algo) Preparing flexible budget performance report LO P1
Nina Company prepared the following fixed budget for July using 7,640 units for budgeted sales. Actual sales were 7,340 units and actual costs are shown below.
| Fixed Budget | ||||
| For Month Ended July 31 | Variable Amount per Unit | Total Fixed Cost | Fixed Budget (7,640 units) | Actual Results (7,340 units) |
|---|---|---|---|---|
| Sales | $ 100 | $ 764,000 | $ 750,790 | |
| Variable costs | ||||
| Direct materials | 35 | 267,400 | 271,840 | |
| Direct labor | 15 | 114,600 | 111,700 | |
| Indirect materials | 4 | 30,560 | 28,760 | |
| Sales commissions | 11 | 84,040 | 79,870 | |
| Total variable costs | 65 | 496,600 | 492,170 | |
| Contribution margin | $ 35 | $ 267,400 | $ 258,620 | |
| Fixed costs | ||||
| $ 69,530 | 69,530 | 69,530 | ||
| Supervisor salary | 41,270 | 41,270 | 42,440 | |
| Insurance | 10,210 | 10,210 | 10,210 | |
| Depreciation—Office equipment | 7,540 | 7,540 | 7,540 | |
| Administrative salaries | 33,900 | 33,900 | 30,360 | |
| Total fixed costs | $ 162,450 | 162,450 | 160,080 | |
| Income | $ 104,950 | $ 98,540 |
Prepare a flexible budget performance report for July at activity level of 7,340 units. Show variances between budgeted and actual amounts. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.)
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