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
Steps in preparing the above report:
Calculate the per unit SP, VC/unit, and CM per unit as in the column that is not part of the
schedule shown above.
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.
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
Prepare a reconciliation to show why Actual Operating Income is different from