ACCO 330 - CHPT 13

# Actual sales volume was different than planned actual

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Actual sales volume was different than planned Actual selling price per unit was different than planned Actual variable cost per unit was different than planned Actual total fixed costs were different than planned The flexible budget allows us to breakdown the total operating income variance into components related to the above four factors

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8 Blocher,Stout,Cokins,Chen, Cost Management 4e Total Operating Income Variance Actual Budget Flexible Volume Master Results Variance Budget Variance Budget Unit sales 8,000 - 8,000 2,000 U 10,000 Sales revenue 88,000 \$ \$8,000F 80,000 \$ 20,000 U 100,000 \$ Less variable costs: Manufacturing 25,500 1,500U 24,000 6,000 F 30,000 Mkt. and Admin. 17,100 1,100U 16,000 4,000 F 20,000 Contribution margin 45,400 \$5,400F 40,000 10,000 U 50,000 Less fixed costs: Manufacturing 12,500 \$ 500U 12,000 - 12,000 Mkt. and Admin. 13,200 \$ 200U 13,000 - 13,000 Operating income 19,700 \$ \$ 4,700F 15,000 \$ \$10,000 U 25,000 \$ (1) (2) (3)
9 Blocher,Stout,Cokins,Chen, Cost Management 4e Sales Volume Variance The difference between the flexible budget results and the master budget results The difference in operating income between the two budget columns is due entirely to sales volume being different than planned The sales volume variance can also be calculated as: budgeted cm per unit x (actual – budgeted) units In the example: \$5/unit x 2,000 units = \$10,000 U

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