Question

The fixed budget for 21,000 units of production shows sales of $525,000 : variable costs of $63,000 : and fixed costs of $140,000. The company's actual sales were 26,900 units at $623,500. Actual varlable costs were $114,000 and actual fixed costs were $134,000 Prepare a flexible budget performance report. Indicate whether each variance is favorable or unfavorable.

Answer 1

To prepare the flexible budget performance report, compare the actual results with the budgeted results. The report will show a favorable variance for sales, an unfavorable variance for variable costs, and a favorable variance for fixed costs.

Step-by-step explanation:

To prepare a flexible budget performance report, we need to compare the actual results with the budgeted results. Let's calculate the budgeted sales, variable costs, and fixed costs for the actual level of production:

1. Budgeted sales: 21,000 units x $525,000 / 21,000 units = $525,000
2. Budgeted variable costs: 21,000 units x $63,000 / 21,000 units = $63,000
3. Budgeted fixed costs: $140,000

Now, let's compare the actual results with the budgeted results:

• Favorable variance for sales: Actual sales - Budgeted sales = $623,500 - $525,000 = $98,500
• Unfavorable variance for variable costs: Actual variable costs - Budgeted variable costs = $114,000 - $63,000 = $51,000
• Favorable variance for fixed costs: Actual fixed costs - Budgeted fixed costs = $134,000 - $140,000 = -$6,000

Therefore, the flexible budget performance report would show a favorable variance for sales, an unfavorable variance for variable costs, and a favorable variance for fixed costs.