Question

E7-21 (similar to) Question Help Smith Smith Enterprises manufactures tires for the Formula 1 motor racing circuit. For August 2017 2017​, it budgeted to manufacture and sell 3 comma 100 3,100 tires at a variable cost of $ 77 $77 per tire and total fixed costs of $ 53 comma 500 $53,500. The budgeted selling price was $ 108 $108 per tire. Actual results in August 2017 2017 were 2 comma 900 2,900 tires manufactured and sold at a selling price of $ 109 $109 per tire. The actual total variable costs were $ 240 comma 700 $240,700​, and the actual total fixed costs were $ 49 comma 500 $49,500. Read the requirements LOADING... . Requirement 1. Prepare a performance report that uses a flexible budget and a static budget. Begin with the actual​ results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable.​ (For variances with a​ $0 balance, make sure to enter​ "0" in the appropriate field. If the variance is​ zero, do not select a​ label.) Actual Results Units sold Revenues Variable costs Contribution margin Fixed costs Operating income Enter any number in the edit fields and then click Check Answer. 3 parts remaining Clear All Check Answer

Answer 1

1. Prepare a performance report that uses a flexible budget and a static budget
	Actual Results (Refer working note 1)	Flexible Budget Variances		Flexible Budget (Refer working note 2)		Sales Volume Variance		Static Budget (Refer working note 3)
	(a)	(a- b)		(b)		(b - c)		(c)
Units sold	2900			2900				3100
Revenues	$316,100	$2,900	F	$313,200		$21,600	U	$334,800
Variable costs	$240,700	$17,400	U	$223,300		$15,400	F	$238,700
Contribution Margin	$75,400	$14,500	U	$89,900		$6,200	U	$96,100
Fixed costs	$49,500	$4,000	F	$53,500		$0		$53,500
Operating Income	$25,900	$10,500	U	$36,400		$6,200	U	$42,600

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Working note 1 - Actual results
Actual units sold                                (a)	2900
Actual selling price per unit              (b)	$109
Revenues                                         (a x b)	$316,100
Less: Actual variable costs	$240,700
Contribution margin	$75,400
Less: Actual fixed cost	$49,500
Operating Income	$25,900

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Working note 2 - Flexible budget
Actual units sold                                (a)	2900
Budgeted selling price per unit           (b)	$108
Budgeted variable cost per unit          (c)	$77
Revenues                                         (a x b)	$313,200
Less: Flexible variable costs          (a x c)	$223,300
Contribution margin	$89,900
Less: Budgeted fixed cost	$53,500
Operating Income	$36,400

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Working note 3 - Static budget
Budgeted units sold                            (a)	3100
Budgeted selling price per unit           (b)	$108
Budgeted variable cost per unit          (c)	$77
Revenues                                         (a x b)	$334,800
Less: Budgeted variable costs        (a x c)	$238,700
Contribution margin	$96,100
Less: Budgeted fixed cost	$53,500
Operating Income	$42,600