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Static and Flexible Budgets Graham Corporation used the following data to evaluate its current operating system....

Static and Flexible Budgets Graham Corporation used the following data to evaluate its current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit. Actual Budgeted Units sold 991,000 1,000,000 Variable costs 1,280,000 1,500,000 Fixed costs 955,000 905,000 a. Prepare the actual income statement, flexible budget, and static budget. b. What is the static-budget variance of revenues? c. What is the flexible budget variance for variable costs? d. What is the flexible budget variance for fixed costs?

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Answer #1

a) Prepare income statement

Actual Flexible budget Static budget
Sales 9910000 9910000 10000000
Variable cost 1280000 1486500 1500000
Contribution margin 8630000 8423500 8500000
Fixed cost 955000 905000 905000
Net income 7675000 7518500 7595000

b) Static budget variance for revenue = 9910000-10000000 = 90000 U

c) Flexible budget variance for variable cost = 1280000-1486500 = 206500 F

d) Flexible budget variance for fixed cost = 955000-905000 = 50000 U

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