Question

Solitaire Company’s fixed budget performance report for June follows. The \(315,000 budgeted expenses include \)294,000 variable expenses and \(21,000 fixed expenses. Actual expenses include \)27,000 fixed expenses. Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately.

Fixed Budget Actual Results Variances

Sales (in units) 8,400 10,800

Sales (in dollars) \(420,000 \)540,000 \(120,000 F

Total expenses 315,000 378,000 63,000 U

Income from operations \)105,000 \(162,000 \)57,000 F

Short answer

The income from operations is $21,000 (Favorable).

Step-by-step solution

Meaning of Income from Operations

In accounting, income from operations or operating income denotes the revenues generated from the primary activities of a business concern. It generally includes the sale and purchase of goods or services.

Preparation of flexible budget performance report

Particulars	Flexible Budget	Actual Results	Variances
Sales	540,000	540,000
Less: Variable expenses	378,000	351,000	27,000 (F)
Contribution margin	162,000	189,000	27,000 (F)
Less: Fixed expenses	21,000	27,000	6,000 (U)
Income from operations	141,000	162,000	162,000