Pebco Company’s 2011 master budget included the following fixed budget report. It is based on an expected production and sales volume of 17,000 units.
PEBCO COMPANY Fixed Budget Report For Year Ended December 31, 2011 |
Sales | $ | 3,400,000 | |||
Cost of goods sold | |||||
Direct materials | $ | 1,005,000 | |||
Direct labor | 225,000 | ||||
Machinery repairs (variable cost) | 75,000 | ||||
Depreciation—plant equipment | 315,000 | ||||
Utilities ($50,000 is variable) | 210,000 | ||||
Plant management salaries | 215,000 | 2,045,000 | |||
Gross profit | 1,355,000 | ||||
Selling expenses | |||||
Packaging | 80,000 | ||||
Shipping | 115,000 | ||||
Sales salary (fixed annual amount) | 250,000 | 445,000 | |||
General and administrative expenses | |||||
Advertising expense | 127,000 | ||||
Salaries | 241,000 | ||||
Entertainment expense | 100,000 | 468,000 | |||
Income from operations | $ | 442,000 | |||
Pebco Company’s actual income statement for 2011 follows. |
PEBCO COMPANY Statement of Income from Operations For Year Ended December 31, 2011 |
Sales (20,000 units) | $ | 4,078,000 | |||
Cost of goods sold | |||||
Direct materials | $ | 1,198,353 | |||
Direct labor | 271,706 | ||||
Machinery repairs (variable cost) | 79,235 | ||||
Depreciation—plant equipment | 315,000 | ||||
Utilities (fixed cost is $157,500) | 215,824 | ||||
Plant management salaries | 224,000 | 2,304,118 | |||
Gross profit | 1,773,882 | ||||
Selling expenses | |||||
Packaging | 91,618 | ||||
Shipping | 127,794 | ||||
Sales salary (annual) | 266,000 | 485,412 | |||
General and administrative expenses | |||||
Advertising expense | 134,000 | ||||
Salaries | 241,000 | ||||
Entertainment expense | 104,000 | 479,000 | |||
Income from operations | $ | 809,470 | |||
Required: | |
1. |
Prepare a flexible budget performance report for 2011. (Do not round your intermediate calculations and round your final answers to nearest dollar amount. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) |
PEBCO COMPANY |
Flexible Budget Performance Report |
For Year Ended December 31, 2011 |
Flexible | Actual | ||||||
Budget | Results | Variances | |||||
(Click to select)Sales salaryAdvertising expenseSalesSalariesUtilities | $ | $ | $ | (Click to select)FNoneU | |||
Variable costs | |||||||
(Click to select)Advertising expenseEntertainment expenseDirect materialsDepreciation-plant equipmentSales salary | (Click to select)FNoneU | ||||||
(Click to select)Direct laborAdvertising expenseEntertainment expenseSalariesDepreciation-plant equipment | (Click to select)FNoneU | ||||||
(Click to select)Entertainment expenseSales salaryDepreciation-plant equipmentSalariesMachinery repairs | (Click to select)UNoneF | ||||||
(Click to select)Advertising expenseUtilitiesEntertainment expenseSales salarySalaries | (Click to select)UNoneF | ||||||
(Click to select)SalariesPlant management salariesAdvertising expenseEntertainment expensePackaging | (Click to select)NoneUF | ||||||
(Click to select)Plant management salariesSales salariesEntertainment expenseShippingDepreciation-plant equipment | (Click to select)UNoneF | ||||||
Total variable costs | (Click to select)NoneFU | ||||||
(Click to select)Gross marginContribution margin | (Click to select)UFNone | ||||||
Fixed costs | |||||||
(Click to select)Depreciation-plant equipmentShippingMachinery repairsDirect materialsPackaging | (Click to select)FUNone | ||||||
(Click to select)ShippingDirect laborUtilitiesDirect materialsPackaging | (Click to select)UNoneF | ||||||
(Click to select)Direct materialsShippingMachinery repairsPlant management salariesDirect labor | (Click to select)UFNone | ||||||
(Click to select)Sales salaryDirect laborPackagingDirect materialsMachinery repairs | (Click to select)FNoneU | ||||||
(Click to select)Advertising expensePackagingShippingDirect materialsDirect labor | (Click to select)NoneFU | ||||||
(Click to select)Machinery repairsSalariesDirect materialsShippingPackaging | (Click to select)NoneFU | ||||||
(Click to select)ShippingDirect materialsEntertainment expensePackagingMachinery repairs | (Click to select)UNoneF | ||||||
Total fixed costs | (Click to select)NoneFU | ||||||
Income from operations | $ | $ | $ | (Click to select)NoneFU | |||
Flexible budget report | |||||||||
Variable | total | Flexible | Actual | Variance | |||||
amount | fixed cost | budget | results | ||||||
per unit | |||||||||
units | 20,000 | 20,000 | |||||||
Sales | 200 | 4000000 | 4,078,000 | 78,000 | F | ||||
variable costs: | |||||||||
Direct materials | 59.11765 | 1182353 | 1,198,353 | 16,000 | U | ||||
Direct labor | 13.23529 | 264706 | 271,706 | 7,000 | U | ||||
Machinery repair | 4.411765 | 88235 | 79,235 | 9000 | F | ||||
Utilities | 2.941176 | 58824 | 58,324 | 500 | F | ||||
packaging | 4.705882 | 94118 | 91,618 | 2500 | F | ||||
shipping | 6.764706 | 135294 | 127,794 | 7500 | F | ||||
total variable costs | 91.17647 | 1823530 | 1,827,030 | 3,500 | U | ||||
contribution margin | 108.8235 | 2176470 | 2,250,970 | 74,500 | F | ||||
fixed costs: | |||||||||
Depreciation-plant equipment | 315,000 | 315,000 | 315,000 | 0 | N | ||||
utilities | 160000 | 160000 | 157,500 | 2,500 | F | ||||
plant management salaries | 215,000 | 215,000 | 224,000 | 9,000 | U | ||||
sales salary | 250,000 | 250,000 | 266,000 | 16,000 | U | ||||
advertising | 127,000 | 127,000 | 134,000 | 7,000 | U | ||||
Salaries | 241,000 | 241,000 | 241,000 | 0 | N | ||||
Entertainment expense | 100,000 | 100,000 | 104,000 | 4,000 | U | ||||
total fixed costs | 1,408,000 | 1,441,500 | 33,500 | U | |||||
income from operations | 768,470 | 809,470 | 41,000 | F | |||||
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