1. Epsilon Technology

Scenario: Variance Analysis

Data: Epsilon Technology set the following budget and reported actual results for the year:

• Budgeted Sales Revenue: $1,000,000
• Actual Sales Revenue: $900,000
• Budgeted Variable Costs: $400,000
• Actual Variable Costs: $380,000
• Fixed Costs: $200,000

Requirements:

1. Calculate the sales variance for Epsilon Technology.
2. Determine the variable cost variance and fixed cost variance.
3. Analyze the variances and discuss their implications on Epsilon Technology's financial performance.
4. Recommend corrective actions based on the variance analysis to improve profitability.
5. Discuss the advantages of using a flexible budget for variance analysis.
6. Evaluate the impact of a 5% increase in fixed costs on Epsilon Technology's profitability.