Question

Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted total expenses include...

Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted total expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

Fixed Budget Actual Results Variances
Sales (in units) 8,000 6,900
Sales (in dollars) $ 640,000 $ 621,000 $ 19,000 U
Total expenses 587,000 550,000 37,000 F
Income from operations $ 53,000 $ 71,000 $ 18,000 U


Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.

BAY CITY COMPANY
Flexible Budget Performance Report
For Month Ended July 31
Flexible budget Actual results Variances Fav./Unf.
Contribution margin
Business   Accounting   
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Answer #1
BAY CITY COMPANY
Flexible Budget Performance Report
For Month Ended July 31
Flexible budget Actual results Variances Fav./Unf.
Sales 552000 621000 69000 Favorable
Variable expenses 345000 373000 28000 Unfavorable
Contribution margin 207000 248000 41000 Favorable
Fixed expenses 187000 177000 10000 Favorable
Income from operations 20000 71000 51000 Favorable
Workings:
Sales in flexible budget = 640000/8000*6900 =$552000
Variable expenses in flexible budget = 400000/8000*6900 =$345000
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