Cellular Technologies manufactures capacitors for cellular base stations and other communication applications. The company’s July 2016 flexible budget shows output levels of 7,500, 9,000, and 11,000 units. The static budget was based on expected sales of 9,000 units.
The company sold 11,000 units during July, and its actual operating income was as follows:
1. Prepare a flexible budget performance report for July 2016.
2. What was the effect on Cellular’s operating income of selling 2,000 units more than the static budget level of sales?
3. What is Cellular’s static budget variance for operating income?
4. Explain why the flexible budget performance report provides more useful information to Cellular’s managers than the simple static budget variance. What insights can Cellular’s managers draw from this performance report?

  • CreatedJune 15, 2015
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