TOPIC

Budgeting and Variance Analysis

ACTIVITY TITLE

Calculate the Marginal cost of the firm from the total cost with the help of diagram.

ACTIVITY

DIRECTION &

REQUIREMENT/S

1. The master (static) budget, flexible budget and Actual The following information has been gathered:

Particulars	Master Budget	Flexible Budget	Actual Results
Units sold	1500	1200	1200
Revenue	150000	120000	125000
Direct Material Cost	72000	57600	62160
Direct Labour Cost	19200	?	19800
Manufacturing Overheads	15000	?	13050
Total Variable Costs	?	?	?
Contribution Margin	?	?	?
Fixed cost	27600	27600	28500
Net Income

As the management accountant of the company prepare the Flexible budget variance, Sales volume variances and the static budget variance.

2. Distinguish between the two broad components of the master budget.

3. IKEA Bahrain manufactures tables for Schools in Bahrain. The master budget is based on sales of 20,000 units at BD100 Per table. Operating income is anticipated to be BD120,000. Budgeted variable costs are BD64 per unit, while fixed costs total BD 600,000. Actual income was BD 354,000 on actual Sales of 21,000 units at BD104 each. Actual variable Costs were BD 60 per unit and fixed costs totaled BD 570,000. Prepare a variance analysis report with both flexible budget and sales volume variances.

Particulars	Master Budget	Sales Volume Variance	Flexible Budget	Flexible Budget Variance	Actual Results
Units sold	20000		21000		21000
Sales Revenue
Variable Costs
Contribution Margin
Fixed cost
Net Income