Question

The following information is available for Brownstone Products Company for the month of July:

	Actual			Master Budget
Units		3,700			4,000
Sales revenue	$	57,600		$	60,000
Variable manufacturing costs		10,200			16,000
Fixed manufacturing costs		12,100			13,400
Variable selling and administrative expenses		6,700			8,000
Fixed selling and administrative expenses		8,200			9,500

Required:

1. What was the total operating income variance for July? (Note: this variance is also called the master (static) budget variance for the period.) Was this variance favorable (F) or unfavorable (U)?

2. Compute the July sales volume variance and the flexible-budget variance for the month, both in terms of contribution margin and in terms of operating income.

4. Prepare pro forma budgets for activities within its relevant range of operations. Prepare a flexible budget for each of the following two output levels:

a. 3,800 units.

b. 4,200 units.

Answer 1