Question

 

Brodrick Company expects to produce 20,400 units for the year ending December 31. A flexible budget for 20,400 units of production reflects sales of $571,200; variable costs of $61,200; and fixed costs of $144,000.

QS 23-3 Flexible budget LO P1

If the company instead expects to produce and sell 27,200 units for the year, calculate the expected level of income from operations.

	------Flexible Budget------ ------Flexible Budget at ------   Variable Amount per Unit Total Fixed Cost 20,400 units 27,200 units                     Contribution margin

QS 23-4 Flexible budget performance report LO P1

Assume that actual sales for the year are $713,600 (27,200 units), actual variable costs for the year are $114,000, and actual fixed costs for the year are $134,000.

Prepare a flexible budget performance report for the year.

	BRODRICK COMPANY Flexible Budget Performance Report For Year Ended December 31   Flexible Budget Actual Results Variances Favorable/ Unfavorable                     Contribution margin

Answer 1

• All working forms part of the answer
• Question 23 – 3

	------Flexible Budget------		------Flexible Budget at ------
	Variable Amount per Unit	Total Fixed Cost	20,400 units	27,200 units
Sales	$                   28.00		$     571,200.00	$     761,600.00
Variable costs	$                     3.00		$       61,200.00	$       81,600.00
Contribution margin	$                   25.00		$     510,000.00	$        680,000.00
Fixed Cost		$        144,000.00	$        144,000.00	$        144,000.00
Income from Operations			$        366,000.00	$        536,000.00

--Working

	------Flexible Budget------		------Flexible Budget at ------
	Variable Amount per Unit	Total Fixed Cost	20,400 units	27,200 units
Sales	=571200/20400		=20400*28	=27200*28
Variable costs	=61200/20400		=20400*3	=27200*3
Contribution margin	=28-3		=20400*25	=761600-81600
Fixed Cost		144000	144000	144000
Income from Operations			=510000-144000	=680000-144000

• Question 23 – 4

BRODRICK COMPANY
Flexible Budget Performance Report
For Year Ended December 31
	Flexible Budget	Actual Results	Variances	Favorable/ Unfavorable
Sales	$           761,600.00	$     713,600.00	$       48,000.00	Unfavourable
Variable Cost	$             81,600.00	$     114,000.00	$       32,400.00	Unfavourable
Contribution margin	$           680,000.00	$     599,600.00	$       80,400.00	Unfavourable
Fixed Cost	$           144,000.00	$     134,000.00	$       10,000.00	Favourable
Income from Operations	$           536,000.00	$     465,600.00	$          70,400.00	Unfavourable