Flexible budget, working backward. The Clarkson Company produces engine parts for car manufacturers. A new accountant intern at Clarkson has accidentally deleted the calculations on the company’s variance analysis calculations for the year ended December 31, 2009. The following table is what remains of the data.

If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e and download the template for Exercise 7-19.

1. Calculate all the required variances. (If your work is accurate, you will find that the total static-budget variance is $0.)

2. What are the actual and budgeted selling prices? What are the actual and budgeted variable costs per unit?

3. Review the variances you have calculated and discuss possible causes and potential problems. What is the important lesson learned here?

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Performance Report, Year Ended December 31, 2009 Flexible-Budget Variances Sales-Volume Flexible Budget Actual Results Static Budget Variances 4 Units sold 5 Revenues (sales) 6 Variable costs 7 Contribution margin 8 Fixed costs 9 Operating income 130,000 $715,000 515,000 120,000 $420,000 240,000 180,000 140,000 $ 60,000 120,000 $ 60,000 2.