Question

Business Solutions’s second-quarter 2018 fixed budget performance report for its computer furniture operations follows. The \(156,000 budgeted expenses include \)108,000 in variable expenses for desks and \(18,000 in variable expenses for chairs, as well as \)30,000 fixed expenses. The actual expenses include \(31,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.

	Fixed Budget	Actual Results	Variances
Desk sales (in units)	144	150
Chair sales (in units)	72	80
Desk sales	\)180,000	\(186,000	\)6,000 F
Chair sales	36,000	41,200	5,200 F
Total expenses	156,000	163,880	7,880 U
Income from operations	\(60,000	\)63,320	$3,320 F

Short answer

Income from operations of the company is unfavorable.

Step-by-step solution

Meaning of Flexible Budget

A flexible budget refers to a report prepared on management estimates that facilitate the computation of the contribution margin and determines the income from operations after deducting all relevant costs.

Preparation of flexible budget performance report

Particulars	Flexible Budget ($)	Actual Results ($)	Variances
Sale of desks	180,000/144*150= 187,500	186,000	1,500 U
Sale of chairs	36,000/72*80= 40,000	41,200	1,200 F
Total sales	227,500	227,200
Less: Variable expenses
Desks	108,000/144*150= 112,500
Chairs	18,000/72*80= 20,000
Total variable expenses	132,500	132,880	380 U
Contribution margin	95,000	94,320	680 U
Less: Fixed cost	30,000	31,000	1,000 U
Income from operations	65,000	63,320	1,680 U