Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. The company's budgeted and actual amounts are as follows: Budgeted for August 2017 Units to manufacture and sell 3,600 Variable cost per tire $71 Total fixed costs $55,000 Budgeted selling price per tire $114 Actual Results for August 2017 Units manufactured and sold 3,500 Selling price per tire $116 Total variable costs $280,000 Total fixed costs $51,000
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.
| Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. The company's budgeted and actual amounts are as follows: | |||||||||
| Budgeted for August 2017 | |||||||||
| Units to manufacture and sell | 3,600 | ||||||||
| Variable cost per tire | $71 | ||||||||
| Total fixed costs | $55,000 | ||||||||
| Budgeted selling price per tire | $114 | ||||||||
| Actual Results for August 2017 | |||||||||
| Units manufactured and sold | 3,500 | ||||||||
| Selling price per tire | $116 | ||||||||
| Total variable costs | $280,000 | ||||||||
| Total fixed costs | $51,000 | ||||||||
| Requirement | |||||||||
| Prepare a performance report that uses a flexible budget and a static budget. | |||||||||
| a. | Enter all amounts as positive values. Do NOT use parentheses or a minus sign for amounts to be subtracted. | ||||||||
| b. | Use the ABS function when calculating variances, and use the drop-down selections for F (favorable) or U (unfavorable) when describing the variances. | ||||||||
| c. | For variances with a zero amount, make sure to enter the result of "=0" in the appropriate cell and leave the drop-down to identify the variance as either F or U blank. |
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