Question

problem 2: suvaranat shows the following budgeted and actual data for the current fiscal year: master budget flexible budget actual income statement units 8,000 9,000 9,000 sales $120,000 $135,000 $136,500 variable costs $56,000 $63,000 $66,000 fixed costs $50,000 $50,000 $52,000 operating income $14,000 $22,000 $18,500 a. was the company effective in reaching its goals? support your position with numbers. b. was the company efficient in reaching its goals? support your position with numbers. c. what was the revenue price variance? d. prepare a flexible budget for 10,000 units, assuming that such a level of production and sales is within the same relevant range. flexible budget calculation units 10,000 given sales variable costs fixed costs operating income

Answer 1

Suvarnat was effective in exceeding its sales targets but less efficient with higher-than-planned costs. The revenue price variance was favorable at $1,500. A new flexible budget for 10,000 units forecasts sales of $150,000, variable costs of $70,000, fixed costs of $50,000, and an operating income of $30,000.

Step-by-step explanation:

When addressing the effectiveness and efficiency of Suvarnat in meeting its goals based on the provided budgeted and actual data, we can draw several conclusions:

• The company was effective in revenue generation, as actual sales ($136,500) exceeded both master budgeted sales ($120,000) and flexible budgeted sales ($135,000).
• The company was less efficient than planned, with actual variable costs ($66,000) and fixed costs ($52,000) being higher than both the master and flexible budgeted costs.
• The operating income was less than the flexible budget by $3,500 ($22,000 - $18,500), indicating some inefficiencies.
• The revenue price variance is the difference between the actual sales and the flexible budgeted sales, which is $136,500 - $135,000 = $1,500 favorable.

To prepare a flexible budget for 10,000 units, assuming variable and fixed costs remain consistent per unit and total respectively, the following would apply:

• Sales: 10,000 units x ($135,000 / 9,000 units) = $150,000
• Variable Costs: 10,000 units x ($63,000 / 9,000 units) = $70,000
• Fixed Costs: $50,000 (unchanged as they are fixed)
• Operating Income: $150,000 - $70,000 - $50,000 = $30,000