Network Technologies manufactures capacitors for cellular base stations and other communication applications. The company’s July 2014 flexible budget shows output levels of 7,000, 8,500, and 10,500 units. The static budget was based on expected sales of 8,500 units.

The company sold 10,500 units during July, and its actual operating income was as follows:
Income Statement
For the Month Ended July 31, 2014.
Sales Revenue........... $ 269,500
Variable Expenses......... 141,500
Contributions Margin........ 128,000
Fixed Expenses ......... 57,000
Operating Income$......... 71,000
1. Prepare a flexible budget performance report for July 2014.
2. What was the effect on Network’s operating income of selling 2,000 units more than the static budget level of sales?
3. What is Network’s static budget variance?
4. Explain why the flexible budget performance report provides more useful ­information to Network’s managers than the simple static budget variance. What insights can Network’s managers draw from this performancereport?

  • CreatedJanuary 16, 2015
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