Question

Complete the following table by filling in the unknown quantities and U/F designations for variances.

	Actual Results	Flexible Budget Variance	Flexible Budget	Sales Volume Variance	Master Budget
Units	3,500				3,200
Sales revenues	$252,000
Variable costs		2,000 U			121,600
Contribution margin
Fixed costs	22,000		20,000
Operating income			$ 92,000

Answer 1

	Actual results [A]]	Flexible Budget Variance[A-B]	Flexible budget[B]	sales volume variance[B-C]	master budget[C]
Units	3500	0	3500	300 F	3200
sales revenue	252000	7000 F	245000    [133000+112000]	21000 F	224000
Variable cost	135000	2000 U	133000	11400 U	121600
contribution margin	117000	5000 F	112000     [20000+92000]	9600 F	102400
Fixed cost	22000	2000 U	20000	0	20000
operating income	95000	3000 F	92000	9600 F	82400

Flexible budget is prepared for actual results.

**fixed cost remain constant (so it same under flexible and master budget)

**variable cost under flexible budget = 121600*3500/3200 = 133000

**sales -variable cost= contribution

contribution -fixed cost = net income

This formula is to be modified as per requirement

**sales in master budget = 245000*3200/3500 = 224000

**Actual variable cost = variable cost under flexible budget +Unfavorable variance

       = 133000+2000 = 135000