Question

Presented are the budgeted and actual contribution margin Income Statements for International Books, LTD. INTERNATIONAL BOOKS,LTD Budgeted Income Statement Actual Income Statement Sales (900*$300)/(1,000*$330) $ 270,000 $ 330,000 Variable Costs Cost of Goods Sold Direct Materials (900*$50) $ 45,000 $ 50,000 Direct Labor (900*$20) $ 18,000 $ 25,000 Manufacturing overhead (900*$30) $ 27,000 $ 35,000 Selling Variable Costs (900*$70) $ 63,000 $ 100,000 Total Variable Costs $ 153,000 $ 210,000 Contribution Margin $ 117,000 $ 120,000 Fixed Costs Manufacturing overhead $ 40,000 $ 38,000 Selling $ 50,000 $ 65,000 Administrative $ 10,500 $ 22,000 Total Fixed Costs $ 100,500 $ 125,000 Net Income (Loss) $ 16,500 $ (5,000) Required:

1. Create a Flexible Budget for 1,000 units. 1. In that Flexible Budget, the Selling costs have been researched and would go up $4,000.

2. Also, Administrative costs are estimated to go up $3,500 despite their fixed cost nature (5 Points) 2. Create a Schedule that documents the following: 1. 1. Volume (Activity) and Spending Variances (Spend management) to explain the Actual and Budgeted Income Statements with the help of your Flexible Budget created in “A”. (5 points)

3. Provide a quick narrative (3-4 sentences) on the insights you observe on these variances documented in B. (5 points)

Answer 1

Answer is given below