Question

Sheridan Entertainment Corporation prepared a master budget for the month of November that was based on sales of 153,000 board games. The budgeted income statement for the period is as follows. Sales Revenue $2,601,000 Variable expenses   Direct materials $703,800   Direct labor 290,700   Variable overhead 397,800 Total variable expenses 1,392,300 Contribution margin 1,208,700    Fixed overhead 253,900    Fixed selling and administrative expenses 508,600 Total fixed expenses 762,500 Operating income $446,200 During November, Sheridan produced and sold 187,300 board games. Actual results for the month are as follows. Sales Revenue $3,173,400 Variable expenses   Direct materials $848,580   Direct labor 370,370   Variable overhead 498,980 Total variable expenses 1,717,930 Contribution margin 1,455,470    Fixed overhead 274,100    Fixed selling and administrative expenses 508,600 Total fixed expenses 782,700 Operating income $672,770

A. Prepare flexible budget for November . B.  Calculate Sheridan’s static budget variance for November. C.Based on the available information, prepare a performance report for management.

Answer 1

A.)	Flexible Budget for November
	Units	187,300
		Amount in $
	Sales Revenue	3,184,100	(2,601,000 /153,000 ) x 187,300
	Variable expenses:
	Direct materials	861,580	(703,800 /153,000 ) x 187,300
	Direct labor	355,870	(290,700 /153,000 ) x 187,300
	Variable overhead	486,980	(397,800 /153,000 ) x 187,300
	Total variable expenses	1,704,430
	Contribution margin	1,479,670
	Fixed overhead	253,900
	Fixed selling and administrative expenses	508,600
	Total fixed expenses	762,500
	Operating income	717,170
B.)	Static budget variance for November
		Static Budget	Flexible Budget
	Units	153,000	187,300
		Amount in $	Amount in $	Variance	Type
	Sales Revenue	2,601,000	3,184,100	583,100	F
	Variable expenses:
	Direct materials	703,800	861,580	157,780	U
	Direct labor	290,700	355,870	65,170	U
	Variable overhead	397,800	486,980	89,180	U
	Total variable expenses	1,392,300	1,704,430	312,130	U
	Contribution margin	1,208,700	1,479,670	270,970	F
	Fixed overhead	253,900	253,900	-
	Fixed selling and administrative expenses	508,600	508,600	-
	Total fixed expenses	762,500	762,500	-
	Operating income	446,200	717,170	270,970	F
C.)	Performance Report
		Actual	Flexible Budget
	Units	187,300	187,300
		Amount in $	Amount in $	Variance	Type
	Sales Revenue	3,173,400	3,184,100	10,700	U
	Variable expenses:
	Direct materials	848,580	861,580	13,000	F
	Direct labor	370,370	355,870	14,500	U
	Variable overhead	498,980	486,980	12,000	U
	Total variable expenses	1,717,930	1,704,430	13,500	U
	Contribution margin	1,455,470	1,479,670	24,200	U
	Fixed overhead	274,100	253,900	20,200	U
	Fixed selling and administrative expenses	508,600	508,600	-
	Total fixed expenses	782,700	762,500	20,200	U
	Operating income	672,770	717,170	44,400	U