Question

Brodrick Company expects to produce 21,600 units for the year ending December 31. A flexible budget for 21,600 units of production reflects sales of $626,400; variable costs of $64,800; and fixed costs of $141,000.

QS 08-4 Flexible budget performance report LO P1

Assume that actual sales for the year are $752,500 (27,500 units), actual variable costs for the year are $113,100, and actual fixed costs for the year are $133,000.

Prepare a flexible budget performance report for the year. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Answer 1

Flexible budget performance report
	Flexible budget	Actual results	variance	Favorable/unfavorable
sale	797,500	752,500	45,000	unfavorable
variable expenses	82,500	113,100	30,600	unfavorable
contribution margin	715,000	639,400	14,400	unfavorable
fixed expenses	141,000	133,000	8,000	Favorable
income from operation	574,000	506,000	6,400	unfavorable
Working
sales (626,400/21,600) * 27,500=797,500
variable expenses= (64,800/21,600)*27,500=82,500

Working note

Variance of contribution margin = Sales variance - variable expense variance

Variance of income from operations = contribution margin variance - fixed expense variance