Hanno had the following static budget for March, when it expected to sell 4,000 sandwiches:
Sales revenue | $ 48,000 |
Variable costs | $ 32,000 |
Fixed costs | $ 5,000 |
Net income | $11,000 |
Hanno actually sold 5,000 sandwiches during March at $12 each.
Variable costs were $38,000 and fixed costs were $4,800.
A. Prepare a flexible budget at for March that will help Hanno separate the volume variance from the flexible budget variance. Make your income statement match my format and compute net income.
B. What is the volume variance for variable costs?
C. What is the flexible budget variance for variable costs?
Answer - | ||||||||
Units | Static 4000 | 5000 | 5000 | |||||
Static Budget | Flexible Budget | Actual | ||||||
Sales revenue | 48000 | 60000 | 60000 | |||||
Variable costs | 32000 | 40000 | 38000 | |||||
Fixed costs | 5000 | 5000 | 4800 | |||||
Net Income | 11000 | 15000 | 17200 | |||||
B | Volume variance for variable costs | Budgeted Variable Cost -Actual Variable Cost | ||||||
=32000-38000 | ||||||||
6000 | Unfavourable | |||||||
C | Flexible Budget Variance for variable costs | Flexible Budget Variable cost -Actual Variable Cost | ||||||
=40000-38000 | ||||||||
2000 | Favourable | |||||||
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