Problem 21-1A (Algo) Preparing and analyzing a flexible budget LO P1 Required: 1&2. Prepare flexible budgets at sales volumes of 14,300 and 16,300 units. 3. The company’s business conditions are improving. One possible result is a sales volume of 18,300 units. Prepare a simple budgeted income statement if 18,300 units are sold.
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.
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Phoenix Company reports the following fixed budget. It is based on an expected production and sales volume of 15,300 units.
| PHOENIX COMPANY | |
| Fixed Budget | |
| For Year Ended December 31 | |
| Sales | $ 3,213,000 |
|---|---|
| Costs | |
| Direct materials | 1,009,800 |
| Direct labor | 244,800 |
| Sales staff commissions | 61,200 |
| 300,000 | |
| Supervisory salaries | 197,000 |
| Shipping | 229,500 |
| Sales staff salaries (fixed annual amount) | 245,000 |
| Administrative salaries | 534,920 |
| Depreciation—Office equipment | 198,000 |
| Income | $ 192,780 |
Problem 21-1A (Algo) Preparing and analyzing a flexible budget LO P1
Required:
1&2. Prepare flexible budgets at sales volumes of 14,300 and 16,300 units.
3. The company’s business conditions are improving. One possible result is a sales volume of 18,300 units. Prepare a simple
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Problem 21-2A (Algo) Preparing a flexible budget performance report LO P1
Phoenix Company reports the following actual results. Actual sales were 18,300 units.
| Sales (18,300 units) | $ 3,888,750 |
|---|---|
| Costs | |
| Direct materials | $ 1,222,440 |
| Direct labor | 300,120 |
| Sales staff commissions | 64,050 |
| Depreciation—Machinery | 300,000 |
| Supervisory salaries | 210,000 |
| Shipping | 266,265 |
| Sales staff salaries (fixed annual amount) | 265,000 |
| Administrative salaries | 544,920 |
| Depreciation—Office equipment | 198,000 |
| Income | 517,955 |
Required:
Prepare a flexible budget performance report for the year. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "No variance" and enter "0" for zero variance.)
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