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Chapter 21: Q4QS (page 968)

Question: Refer to information in QS 21-3. Assume that actual sales for the year are \(480,000 (26,000 units), actual variable costs for the year are \)112,000, and actual fixed costs for the year are $145,000. Prepare a flexible budget performance report for the year.

Short Answer

Expert verified

The performance report is showing the favorable variance of$53,000.

Step by step solution

01

Meaning of Flexible Budget Performance Report

The business entities use a flexible budget performance report to find the variances between desired and actual outcomes. Such a report facilitates the management to makeshort-term decisions.

02

Preparation of flexible budget performance report

Brodrick Company
Flexible Budget Performance Report
For the year ended December 31

Particulars

Flexible Budget ($)

Actual Result ($)

Variances ($)

Sales (20,000 units)

400,000

480,000

80,000 (F)

Variable costs

80,000

112,000

32,000 (U)

Contribution margin

320,000

368,000

48,000 (F)

Fixed cost

150,000

145,000

5,000 (F)

Income from operations

$170,000

$223,000

$53,000 (F)

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Most popular questions from this chapter

Refer to the information in Problem 21-1A. Phoenix Company’s actual income statement for 2017 follows.

PHOENIX COMPANY

Statement of Income from Operations

For Year Ended December 31, 2017

Sales (18,000 units)


\(3,648,000

Cost of goods sold



Direct materials

\)1,185,000


Direct labor

278,000


Machinery repairs (variable cost)

63,000


Depreciation-Plant equipment

300,000


Utilities (Fixed cost is \(147,500)

200,500


Plant management salaries

210,000

2,236,500

Gross profit


1,411,500

Selling expenses



Packaging

87,500


Shipping

118,500


Sales salary (annual)

268,000

474,000

General and administrative expenses



Advertising expense

132,000


Salaries

241,000


Entertainment expense

93,500

466,500

Income from operations


\)471,000

Required

1. Prepare a flexible budget performance report for 2017.

Analysis Component

2. Analyze and interpret both the

(a) sales variance and

(b) direct materials cost variance.

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

Fogel Co. expects to produce 116,000 units for the year. The company’s flexible budget for 116,000 units of production shows variable overhead costs of \(162,400 and fixed overhead costs of \)124,000. For the year, the company incurred actual overhead costs of $262,800 while producing 110,000 units. Compute the controllable overhead variance and classify it as favorable or unfavorable.

Is it possible for a retail store such as Apple to use variances in analyzing its operating performance? Explain.

World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company expects to use 25,000 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.625 direct labor hours per unit. At the 80% capacity level, the total budgeted cost includes \(50,000 fixed overhead cost and \)275,000 variable overhead cost. In the current month, the company incurred $305,000 actual overhead and 22,000 actual labor hours while producing 35,000 units.

1. Compute the predetermined standard overhead rate for total overhead.

2. Compute and interpret the total overhead variance.
See all solutions

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