Question

Connolly Enterprises manufactures tires for the Formula 1 motor racing circuit. For August 2017 ​, it budgeted to manufacture and sell 3 comma 100 tires at a variable cost of $ 73 per tire and total fixed costs of $ 53 comma 500 . The budgeted selling price was $ 116 per tire. Actual results in August 2017 were 3 comma 000 tires manufactured and sold at a selling price of $ 119 per tire. The actual total variable costs were $ 240 comma 000 ​, and the actual total fixed costs were $ 50 comma 500 . Read the requirements LOADING... . Requirement 1. Prepare a performance report that uses a flexible budget and a static budget. Begin with the actual​ results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable.​ (For variances with a​ $0 balance, make sure to enter​ "0" in the appropriate field. If the variance is​ zero, do not select a​ label.) Actual Results Units sold Revenues Variable costs Contribution margin Fixed costs Operating income Flexible-Budget Flexible Variances Budget Sales-Volume Static Variances Budget Requirement 2. Comment on the results in requirement 1. The total static-budget variance in operating income is $ There is a(n) total flexible-budget variance and a(n) sales-volume variance. The sales-volume variance arises solely because actual units manufactured and sold were than the budgeted 3,100 units. The flexible-budget variance in operating income is due primarily to the in unit variable costs. Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

1		Actual Results (A)	Flexib. Bud. Vari. (B) = (A) – (C)		Flexible Budget (C)	Sales-Vol. Var. (D) = (C) – (E)		Static Budget (E)
	Units (tires) sold	3,000	0		3,000	100	U	3,100
	Revenues	$357,000	$9,000	F	$348,000	$11,600	U	$359,600
	Variable costs	240,000	21,000	U	219,000	7,300	F	226,300
	Contribution margin	117,000	12,000	U	129,000	4300	U	133,300
	Fixed costs	50,500	3,000	F	53,500	0		53,500
	Net-Op-erating Income	$66,500	$9,000	U	$75,500	$4,300	U	$79,800
			9000 U			4300 U
			Total flexible-budget variance			Total sales-volume variance
			13300 U
			Total static-budget variance
2	The key information items are:
		Actual	Budgeted
	Units	3,000	3,100
	Unit selling price	$119	$116
	Unit variable cost	$80	$73
	Fixed costs	$50,500	$53,500
	The total static-budget variance in operating income is $13,300 U. There is both an unfavorable total flexible-budget variance ($9,000) and an unfavorable sales-volume variance ($4,300).
	The unfavourable sales-volume variance are due to actual units manufactured and sold were 100 less than the budgeted 3,100 units. The unfavorable flexible-budget variance of $9,000 in operating income is due primarily to the $7 increase in unit variable costs. This increase in unit variable costs is only partially offset by the $3 increase in unit selling price and the $3,000 decrease in fixed costs.