Sanchez Corporation manufactures tables for schools. The 2023 operating budget is based on sales of 100,000 units at $500 per table. Budgeted variable costs are $350 per unit, while fixed costs total $6,000,000. For 2023, actual sales were 110,000 units at $490 each. Actual variable costs were $360 per unit and fixed costs totaled $5,800,000. Required: a) Prepare a report showing actual results, a static budget and a flexible budget. b) Explain the significance of a flexible budget versus a static budget.
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.
Sanchez Corporation manufactures tables for schools. The 2023 operating budget is based on sales of 100,000 units at $500 per table. Budgeted variable costs are $350 per unit, while fixed costs total $6,000,000.
For 2023, actual sales were 110,000 units at $490 each. Actual variable costs were $360 per unit and fixed costs totaled $5,800,000.
Required:
- a) Prepare a report showing actual results, a static budget and a flexible budget.
- b) Explain the significance of a flexible budget versus a static budget.
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