The following is a partially completed performance report for Surf World.

	A	B	C	D	E	F
1	Surf World
2	Flexible Budget Performance Report: Sales and Operating Expenses
3	For the Year Ended April 30
4		Actual	Flexible Budget Variance	Flexible Budget	Volume Variance	Master Budget
5	Sales volume (number of pools installed)	5	?	?	?	4
6	Sales revenue	$105,000	?	$110,000	?	$88,000
7	Operating expenses:
8	Variable expenses	$55,000	?	$57,000	?	$45,600
9	Fixed expenses	25,000	?	29,000	?	29,000
10	Total operating expenses	?	?	?	?	?

Read the requirements:

1. How many pools did Surf World originally think it would install in April?

2. How many pools did Surf World actually install in April?

3. How many pools is the flexible budget based on? Why?

4. What was the budgeted sales price per pool?

5. What was the budgeted variable cost per pool?

6. Define the flexible budget variance. What causes it?

7. Define the volume variance. What causes it?

8. Fill in the missing numbers in the performance report.

.1. How many pools did Surf World originally think they would install in April?

The

master budget indicates

that Surf World planned to sell

4

pools in April.

2. How many pools did Surf World actually install in April?

The

acutal results indicate

that Surf World installed

5

pools in April.

3. How many pools is the flexible budget based on? Why?

The flexible budget for performance reports is always based on the						actual	output for the month. This is done so
that managers can compare	apples-to-apples					, meaning they can compare
actual revenues and expenses		to
revenues and expenses they would expect to achieve given the same volume									.
Therefore, Surf World's flexible budget is based on				5	pools.

4. What was the budgeted sales price per pool? (Round your answer to the nearest whole dollar.)

The budgeted sales price is

$22,000

per pool.

5. What was the budgeted variable cost per pool? (Round your answer to the nearest whole dollar.)

The budgeted variable cost is

$11,400

per pool.

6. Define the flexible budget variance. What causes it?

As the name suggests, the flexible budget variance is the difference between the flexible budget and the actual results. Since the actual results and the flexible budget are based on the same volume of output, this variance highlights unexpected revenues and expenses that are caused by factors other than volume.

7. Define the volume variance. What causes it?

The volume variance is the difference between the master budget and the flexible budget. The only difference between these two budgets is the volume of units on which they are based. Therefore, the volume variance is caused by differences between actual and expected volume.

8. Fill in the missing numbers in the performance report. Be sure to indicate whether variances are favorable (F) or unfavorable (U). (Enter the variances as positive numbers. Label each variance as favorable (F) or unfavorable (U). If the variance is 0, make sure to enter in a "0". A variance of zero is considered favorable.)

Surf World
Flexible Budget Performance Report: Sales and Operating Expenses
For the Year Ended April 30
		Flexible Budget		Flexible
	Actual	Variance		Budget	Volume Variance		Master Budget
Output units (pools installed)	5						4
Sales revenue	$105,000			$110,000			$88,000
Operating expenses:
Variable expenses	55,000			57,000			45,600
Fixed expenses	25,000			29,000			29,000
Total operating expenses

Answer rating: 100% (QA)

Particulars Sales volume Sales revenue Actual A Flexible budget varian... View the full answer