Question

Beech Company produced and sold 105,000 units of its product in May. For the level of production achieved in May, the budgeted amounts were: sales, \(1,300,000; variable costs, \)750,000; and fixed costs, \(300,000. The following actual financial results are available for May. Prepare a flexible budget performance report for May.

Actual

Sales (105,000 units) \)1,275,000

Variable costs 712,500

Fixed costs 300,000

Short answer

The flexible budget performance report depicts$12,500 as favorable variances.

Step-by-step solution

Meaning of Budget

A budget refers to a statement prepared by a company’s management based on estimations of expected revenues and expenses in the future. A budget report facilitates the management to compare theactual and desired outcomes.

Preparation of flexible budget performance report

Beech Company
Flexible Budget Performance Report
For the month ended May 31
Particulars	Flexible Budget	Actual Results	Variances
Sales	1,300,000	1,275,000	25,000 (U)
Less: Variable costs	(750,000)	(712,500)	37,500 (F)
Contribution margin	550,000	562,500	12,500 (F)
Less: Fixed costs	(300,000)	(300,000)	0
Income from operations	$250,000	$262,500	12,500 (F)