Question

	Actual Results	Flexible Budget Variance	Flexible Budget	Sales Activity Variance	Master Budget
Units	13,000		?	2000U	?
Sales revenue	?	13,000F	?	?	?
Less:
<Variable mfg. Costs>	$87,750		$91,000	?	$105,000
<Variable mktg/adm.costs>	?	$3,250U	?	$4,000F	30,000
Contribution margin	$52,000	?	?	$6,000U	?

What is the master budget contribution margin?

Select one:

A. $52,000.

B. $45,000.

C. $47,500.

D. $39,000.

Answer 1

Sales activity variance = Flexible budget results - Master budget results

Now, first of all let us find out the Flexible budget variable marketing costs :-

30000 - 4000 = $ 26000

So, the actual variable marketing costs :-

26000 + 3250 = $ 29250

Now, the actual sales revenue =

87750 + 29250 + 52000 = $ 169000

So, the flexible budget Sales revenue :-

169000 - 13000 = $ 156000

Flexible budget Contribution margin :-

156000 - 91000 - 26000 = $ 39000

Master budget Contribution margin :-

39000 + 6000 = $ 45000

Option B is correct.