The following information is available for Brownstone Products Company for the month of July: Actual Master Budget Units 3,900 4,000 Sales revenue $ 55,500 $ 60,000 Variable manufacturing costs 20,800 16,000 Fixed manufacturing costs 14,000 13,700 Variable selling and administrative expenses 9,500 8,000 Fixed selling and administrative expenses 10,900 10,400 Required: 1. What was the total operating income variance for July? (Note: this variance is also called the master (static) budget variance for the period.) Was this variance favorable (F) or unfavorable (U)? 2. Compute the July sales volume variance and the flexible-budget variance for the month, both in terms of contribution margin and in terms of operating income. 4. Prepare pro forma budgets for activities within its relevant range of operations. Prepare a flexible budget for each of the following two output levels: a. 3,930 units. b. 4,330 units
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The following information is available for Brownstone Products Company for the month of July:
| Actual | ||||||
| Units | 3,900 | 4,000 | ||||
| Sales revenue | $ | 55,500 | $ | 60,000 | ||
| Variable |
20,800 | 16,000 | ||||
| Fixed manufacturing costs | 14,000 | 13,700 | ||||
| Variable selling and administrative expenses | 9,500 | 8,000 | ||||
| Fixed selling and administrative expenses | 10,900 | 10,400 | ||||
Required:
1. What was the total operating income variance for July? (Note: this variance is also called the master (static)
2. Compute the July sales volume variance and the flexible-budget variance for the month, both in terms of contribution margin and in terms of operating income.
4. Prepare pro forma budgets for activities within its relevant range of operations. Prepare a flexible budget for each of the following two output levels:
a. 3,930 units.
b. 4,330 units
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