Number of checkbooks 15,000 Selling price per book Variable cost per book Fixed costs for the month 20 $145,000 The actual results for September 2017 were as follows: Number of checkbooks produced and sold Average selling price per book Variable cost per book 12,000 21 Fixed costs for the month $150,000 The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results. Bank Management develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs. 1. Prepare a static-budget-based variance analysis of the September performance. 2. Prepare a flexible-budget-based variance analysis of the September performance. 3. Why might Bank Management find the flexible-budget-based variance analysis more informative than the static-budget-based variance analysis? Explain your answer. Required
Number of checkbooks 15,000 Selling price per book Variable cost per book Fixed costs for the month 20 $145,000 The actual results for September 2017 were as follows: Number of checkbooks produced and sold Average selling price per book Variable cost per book 12,000 21 Fixed costs for the month $150,000 The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results. Bank Management develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs. 1. Prepare a static-budget-based variance analysis of the September performance. 2. Prepare a flexible-budget-based variance analysis of the September performance. 3. Why might Bank Management find the flexible-budget-based variance analysis more informative than the static-budget-based variance analysis? Explain your answer. Required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer’s bank. The company’s operating budget for September 2017 included these data:
Transcribed Image Text:Number of checkbooks
15,000
Selling price per book
Variable cost per book
Fixed costs for the month
20
$145,000
The actual results for September 2017 were as follows:
Number of checkbooks produced and sold
Average selling price per book
Variable cost per book
12,000
21
Fixed costs for the month
$150,000
The executive vice president of the company observed that the operating income for September was much
lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable
cost per unit. As the company's management accountant, you have been asked to provide explanations for
the disappointing September results.
Bank Management develops its flexible budget on the basis of budgeted per-output-unit revenue and
per-output-unit variable costs without detailed analysis of budgeted inputs.
1. Prepare a static-budget-based variance analysis of the September performance.
2. Prepare a flexible-budget-based variance analysis of the September performance.
3. Why might Bank Management find the flexible-budget-based variance analysis more informative than
the static-budget-based variance analysis? Explain your answer.
Required
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