Question

Pebco Company’s 2011 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.

  

PEBCO COMPANY Fixed Budget Report For Year Ended December 31, 2011

Sales				$	3,200,000
Cost of goods sold
Direct materials	$	990,000
Direct labor		225,000
Machinery repairs (variable cost)		60,000
Depreciation—plant equipment		315,000
Utilities ($50,000 is variable)		210,000
Plant management salaries		215,000			2,015,000
Gross profit					1,185,000
Selling expenses
Packaging		85,000
Shipping		110,000
Sales salary (fixed annual amount)		270,000			465,000
General and administrative expenses
Advertising expense		133,000
Salaries		251,000
Entertainment expense		110,000			494,000
Income from operations				$	226,000

Pebco Company’s actual income statement for 2011 follows.

PEBCO COMPANY Statement of Income from Operations For Year Ended December 31, 2011

Sales (19,000 units)				$	3,878,000
Cost of goods sold
Direct materials	$	1,192,625
Direct labor		275,188
Machinery repairs (variable cost)		63,250
Depreciation—plant equipment		315,000
Utilities (fixed cost is $157,500)		215,875
Plant management salaries		226,000			2,287,938
Gross profit					1,590,062
Selling expenses
Packaging		98,938
Shipping		122,625
Sales salary (annual)		288,000			509,563
General and administrative expenses
Advertising expense		141,000
Salaries		251,000
Entertainment expense		113,500			505,500
Income from operations				$	574,999

  

Required:

1.

Prepare a flexible budget performance report for 2011. (Do not round your intermediate calculations and round your final answers to nearest dollar amount. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

PEBCO COMPANY

Flexible Budget Performance Report

For Year Ended December 31, 2011

	Flexible		Actual
	Budget		Results		Variances
(Click to select)SalesSales salaryAdvertising expenseUtilitiesSalaries	$		$		$		(Click to select)UNoneF
Variable costs
(Click to select)Advertising expenseDirect materialsEntertainment expenseDepreciation-plant equipmentSales salary							(Click to select)FUNone
(Click to select)SalariesDirect laborEntertainment expenseAdvertising expenseDepreciation-plant equipment							(Click to select)FNoneU
(Click to select)Entertainment expenseSalariesDepreciation-plant equipmentSales salaryMachinery repairs							(Click to select)UFNone
(Click to select)Sales salaryAdvertising expenseEntertainment expenseUtilitiesSalaries							(Click to select)NoneFU
(Click to select)Advertising expensePlant management salariesSalariesPackagingEntertainment expense							(Click to select)UNoneF
(Click to select)Entertainment expensePlant management salariesDepreciation-plant equipmentShippingSales salaries							(Click to select)NoneUF
Total variable costs							(Click to select)UNoneF
(Click to select)Contribution marginGross margin							(Click to select)UNoneF
Fixed costs
(Click to select)Depreciation-plant equipmentShippingMachinery repairsPackagingDirect materials							(Click to select)FUNone
(Click to select)UtilitiesShippingPackagingDirect materialsDirect labor							(Click to select)FUNone
(Click to select)Plant management salariesDirect laborDirect materialsMachinery repairsShipping							(Click to select)NoneUF
(Click to select)Direct materialsSales salaryMachinery repairsPackagingDirect labor							(Click to select)UNoneF
(Click to select)Direct materialsDirect laborShippingPackagingAdvertising expense							(Click to select)FNoneU
(Click to select)Machinery repairsDirect materialsSalariesPackagingShipping							(Click to select)UFNone
(Click to select)Entertainment expensePackagingMachinery repairsShippingDirect materials							(Click to select)UFNone
Total fixed costs							(Click to select)FNoneU
Income from operations	$		$		$		(Click to select)UNoneF

Answer 1