Suppl Note re Flexible Budget Budget Performance Report

# Suppl Note re Flexible Budget Budget Performance Report - 1...

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1 Supplementary Notes and Related Problems re Flexible Budget Performance Report A Flexible Budget Performance Report contains 5 columns as follows and allows a detailed explanation as to why the actual operating income did not meet the expectations of the Static Budget. Actual Results Flexible Budget Variances Flexible Budget Activity Variance Static Budget Per unit Units Sold 10,000 0 10,000 2,000U 12,000 Sales \$1,850,000 \$50,000F \$1,800,000 \$(360,000)U \$2,160,000 \$180 Variable Costs 1,120,000 \$130,000U \$ 990000 (198,000)F 1,188,000 99 Contribution Margin 730,000 (80,000)U 810,000 (162,000)U 972,000 \$81 Fixed Costs 705,000 (5,000F) 710,000 - 710,000 Operating Income \$25,000 \$(75,000)U \$100,000 \$(162,000)U \$262,000 Steps in preparing the above report: 1. Calculate the per unit SP, VC/unit, and CM per unit as in the column that is not part of the schedule shown above. 2. Since the Flexible Budget should reflect the same output units as the Actual results, use the per unit SP and VC/unit to complete the Flexible Budget column. 3. Then calculate all the static budget and flexible budget variances to complete the schedule. Note the following: the activity variance is always stated in terms of CM the fixed cost component of the activity variance is always zero 4. Prepare a reconciliation to show why Actual Operating Income is different from

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## This note was uploaded on 03/04/2012 for the course ACCT 2460 taught by Professor Farrar during the Winter '12 term at Conestoga.

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Suppl Note re Flexible Budget Budget Performance Report - 1...

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