The master budget at Western Company last period called for sales of 226,500 units at $10.50 each. The costs were estimated to be $3.90 variable per unit and $226,500 fixed. During the period, actual production and actual sales were 231,500 units. The selling price was $10.60 per unit. Variable costs were $6.00 per unit. Actual fixed costs were $226,500. 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.)
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.
The
Required:
Prepare a profit
![Sales revenue
Less:
Variable costs
Contribution margin
Less:
Fixed costs
Operating profits
Actual
Budget
$ 2,453,900✔✔
1,389,000✔
$ 1,084,900
$
226,500✔✔
838,400
WESTERN COMPANY
Profit Variance Analysis.
Manufacturing
Variances
3
U
U
U
33
>
Sales Price
Variance
F
F
LL
3
$
Flexible
Budget
0
226,500
$ (226,500)
Sales Activity
Variance
F
U
F
F
Master
Budget
$ 2,378,250
883,350✔
$ 1,494,900
226,500
$ 1,268,400](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8eb7d608-8711-4c47-ad3d-24252649afd6%2Fd2928f82-14c2-4abb-870f-fa59deaa9ab9%2Fyf8as3f_processed.jpeg&w=3840&q=75)
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