Assume that Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 900 units for $840 each in June.
Question:
Assume that Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 900 units for $840 each in June. The company incurred $414,000 total variable expenses and $180,000 total fixed expenses.
EXHIBIT 14.1
Comparison of Actual and
Budgeted Operating Income
Required for the Month of June:
1. Prepare a flexible budget for the production and sale of 900 units.
2. Compute for June:
a. The sales volume variance, in terms of operating income.
b. The sales volume variance, in terms of contribution margin.
3. Calculate for June:
a. The total flexible-budget (FB) variance.
b. The total variable cost flexible-budget variance.
c. The total fixed cost flexible-budget (FB) variance.
d. The selling price variance.
SCHMIDT MACHINERY COMPANY Analysis of Operating Income For October 2010 (1) (2) (3) Master (Static) Budget Actual Operating Income Variances Units 1,000 780 220U* $ 160,400U 99,050F Sales Variable costs $639,600 350,950 $288,650 160,650 $128,000 $800,000 100% 100% 55 450,000 $ 61,350U 10,650U $350,000 150,000 Contribution margin Fixed costs 45% 44% 25 $ 72,000U $200,000 Operating income 20% 25% * U denotes an unfavorable effect on operating income. 'F denotes a favorable effect.
Step by Step Answer:
1 Flexible budget for June at 90 of the masterbudget level Units sold 900 Sales 90 x 800000 720000 Variable expenses 90 x 450000 405000 Contribution m...View the full answer
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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