Homework Answers
sales volume variance is difference between budgeted and actual units multiplied by budgeted revenue per unit.
flexible budget is the budgeted revenue/cost multiplied by actual output.
| Static budget 10000 units | actual results 8000 units | Flexible budget 8000 units | flexible budget variance[ Actual results-flexible budget] | |
| Total revenues | $200,000 | $128,000 [8000units*$16] | $160,000 | $32000 unfavorable[128000-160000] |
| Total variable costs | $120,000 | $80,000 [128,000-48,000] | $96,000 [160000-64000] | $16,000 favorable[96000-80000] |
| contribution margin [sales- variable cost] | $80000[$8*10000] | $48,000 | $64000 |
$16000 unfavorable [ given in question] |
| Total fixed costs | $20,000 |
$ 18,000 |
$20,000 [64000-44000] | 20000$ favorable |
| operating profit [ contribution margin-fixed cost] | $60,000 [80000-20000] | $30,000[48000-18000] | $44,000 |
$14000 unfavorable [30000-44000] |
working
(1) budgeted revenue per unit = $200,000/10000units
=$20 per unit
flexible revenue = $20*8000=$160,000
(2) sales volume variance = (Actual units sold-budgeted unit sales)*standard contribution per unit
$16000=(8000-10000)*contribution per unit
contribution per unit = $8
variable cost = sales-contribution margin
As the volume variance is 16,000 unfavorable the actual contribution margin is lesser than flexible contribution margin
=64000-16000
=48000$
(3) contribution margin - fixed cost = profit
=64000- fixed cost = 44000
fixed cost = 20000$
note that fixed costs are constant the will remain same for flexible and static budget.
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During this month, the company incurred $380,000 total variable
costs and $181,900 total fixed costs. The master (static) budget
data for the month are as given in Exhibit 14.1.
Required:
1. Prepare a flexible budget for the production and sale of 950
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2. Compute for October 2019:
a. The sales volume variance, in terms of operating income.
Indicate whether this...
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