AllTalk Technologies manufactures capacitors for cellular base stations and other communications applications. The company’s July 2014 flexible budget shows output levels of 6,500, 8,000, and 10,000 units. The static budget was based on expected sales of 8,000 units.

The company sold 10,000 units during July, and its actual operating income was as follows:

1. Prepare a flexible budget performance report for July.
2. What was the effect on AllTalk’s operating income of selling 2,000 units more than the static budget level of sales?
3. What is AllTalk’s static budget variance?
4. Explain why the flexible budget performance report provides more useful ­information to AllTalk’s managers than the simple static budget variance. What insights can AllTalk’s managers draw from this performancereport?

  • CreatedJanuary 16, 2015
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