Horngren's Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (12th Edition)
12th Edition
ISBN: 9780134642949
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 23, Problem P23.30BPGB
Preparing a flexible budget performance report
Learning Objective 1
3. Static Bud. Var. for Op. Inc. $22,900 F
Cell Plus Technologies manufactures capacitors for cellular base stations and other communication applications. The company’s July 2018 flexible budget shows output levels of 8,500, 10,000, and 12,000 units. The static budget was based on expected sales of 10,000 units.
CELL ONE TECHNOLOGIES
Flexible Budget
For the Month Ended July 31, 2018
Budget
Amounts
per Unit
| Units | 8,500 | 10,000 | 12,000 | |
| Sales Revenue | $ 24 | $ 204,000 | $ 240,000 | $ 288,000 |
| Variable Expenses | 13 | 110,500 | 130,000 | 156,000 |
| Contribution Margin | 93,500 | 110,000 | 132,000 | |
| Fixed Expenses | 57,000 | 57,000 | 57,000 | |
| Operating Income | $ 36,500 | $ 53,000 | $ 75,000 |
The company sold 12,000 units during July, and its actual operating income was as follows:
CELL ONE TECHNOLOGIES
Income Statement
For the Month Ended July 31, 2018
| Sales Revenue | $ 295,000 |
| Variable Expenses | 161,100 |
| Contributions Margin | 133,900 |
| Fixed Expenses | 58,000 |
| Operating Income | $ 75,900 |
Requirements
- Prepare a flexible budget performance report for July 2018.
- What was the effect on Cell Plu3 s operating income of selling 2,000 units more than the static budget level of sales?
- What is Cell Plus's static
budget variance for operating income? - Explain why the flexible budget performance report provides more useful information to Cell Plus s managers than the simple static budget variance. What insights can Cell Plus s managers draw from this performance report?
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Chapter 23 Solutions
Horngren's Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (12th Edition)
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