* The trends in actual sales shown at the bottom of the Budget tab
* The activity levels needed to turn a profit since the June actual figures resulted in a loss, and
* The likelihood of achieving different levels of unit sales
See attached for your flexible budget computations and discussion.
Given that June was a loss, I decided to use the June actual sales prices and cost of materials and labor to make the July flexible budgets more realistic. I also started the flex budget at June actual activity levels and then increased mid-grade by 1% and high end by 2% increments. That is the budget percent increases for each product. I updated only one ...
Your tutorial created 25 different flexible budgets for July. This gives the student a sensitivity analysis and shows when the sales "toggle" to break even from June's loss levels. June's actual prices, actual sales quantity and actual materials and labor costs were used instead of budget to give a more realistic forecast for July. An estimate is given when the firm might breakeven given the current growth rates in sales of the two products. The solution provides the flexible budget using the format given and also in a contribution margin format for comparison and study.
Managerial Accounting: Flexible Budget
See Attached Spreadsheet.
A condensed income statement for XYZ Company is as follows for the month of November:
Budget Actual Variance
Units Produced and Sold 20,000 19,000 (1,000)
Sales revenue $400,000 $361,000 $(39,000)
Direct materials 60,000 42,000 $18,000
Direct labor 60,000 76,000 $(16,000)
Manufacturing overhead 130,000 130,000 $-
Selling and administration 100,000 99,000 $1,000
Total Costs 350,000 347,000 $3,000
Operating income $50,000 $14,000 $(36,000)
Further analysis revealed the following data on costs:
per Unit Fixed
Direct materials $3
Direct labor 3
Manufacturing overhead 4 $50,000
Selling and adminstration 2 60,000
Totals $12 $110,000
(1) Prepare a report comparing the master budget with a flexible budget for November.
(2) Calculate the following variances:
a. Sales volume
b. Flexible Budget Direct materials (net)
c. Flexible Budget Direct labor (net)
d. Flexible Budget Manufacturing overhead (net)
e. Flexible Budget Selling and administration (net)
f. Flexible budget variance
(3) Comment on the significance of the variances you calculated.View Full Posting Details