Question

QS 21-4 Flexible budget performance report LO P1 Assume that actual sales for the year are $480,000 (26,000 units), actual variable costs for the year are $112,000, and actual fixed costs for the year are $145,000. Prepare a flexible budget performance report for the year.

Answer 1

The preparation of the flexible budget performance report for the year is presented below:

Step-by-step explanation:

The preparation of the flexible budget performance report for the year

Flexible budget performance report

Flexible budget Actual results Variance fav or unfav

sales $520,000 $480,000 $40,000 Unfav

variable cost ($104,000) ($112,000) $8,000 Unfav

Contribution margin $416,000 $368,000 $48,000 Unfav

Fixed cost ($150,000) ($145,000) $5,000 Fav

Net operating

income $266,000 $223,0 00 $43,000 Unfav

Working Notes:

The selling price per unit is

= $400,000 ÷20,000 units

= $20 per unit

So total sales = 26,000 units × $20 = 520,000

And,

Variable cost per unit is

= $80,000 ÷ 20,000 units

= 4 per unit

So, variable cost is = $4 × 26,000 units = $104,000

If actual sales is less than the flexible budgets sales than it leads to unfavorable variance else it is favorable variance