The master budget at Western Company last period called for sales of 225,000 units at $9 each. The costs were estimated to be $3.75 variable per unit and $225,000 fixed. During the period, actual production and actual sales were 230,000 units. The selling price was $9.10 per unit. Variable costs were $4.50 per unit. Actual fixed costs were $225,000. Required: Prepare a profit variance analysis. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Sales revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profits Actual Budget $ $ 0 0 WESTERN COMPANY Profit Variance Analysis Manufacturing Variances Sales Price Variance Flexible Budget $ $ $ Sales Activity Variance 2,070,000 $ 45,000 862,500 1,207,500 18,750 U $26,250 F 225,000 0 982,500 $26,250 F Master Budget $ 2,025,000 843,750 $ 1,181,250 $ 225,000 956,250

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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.