XYZ Company is a brewer that has two main products: light and draft beer. Its actual operating results and master budget estimates for 2019 are as follows:

(OOO)			2019 Master Budget					2019 Actual
			Light	Draft	Total		Light	Draft	Total
Barrels			180	540	720		240	360	600
Sales			$28,800	$62,100	$90,900		$36,000	$43,200	$79,200
Variable costs			$14,400	$43,200	$57,600		$19,440	$29,160	$48,600
Contribution margin			$14,400	$18,900	$33,300		$16,560	$14,040	$30,600
Fixed costs					$15,000				$15,200
Operating income					$18,300				$15,400

 

 

 

Additional information is provided below:

The budgeted variable cost per barrel consists of 40 liters of purified water at $2 per liter. For the year 2019, 22,200 liters of purified water were consumed.

A market survey estimated the total industry sales to be 1,500,000 barrels during the year. At the end of 2019, the total sales for the industry were 1,200,000 barrels.

Required: 

1. a. Prepare the 2019 Flexible Budget based on 2019 Master Budget and 2019 Actual information.  

b. Reconcile XYZ Company budgeted operating income in 2019 to the actual operating income in 2019 by computing all relevant variances for 2019.         

c. Based on your analysis of the 2019 results, provide some recommendations that would have been useful in the preparation of XYZ Company 2020 operating budget.

Answer rating: 100% (QA)

a 2019 Master Budget 2019 Flexible Budget 2019 Actual Light Draft Total Light Draft Total Light Draft Total Barrels 180 540 720 240 360 600 240 360 60... View the full answer