Question

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use the following information for the quick study below. (algo)
(the following information applies to the questions displayed below).
the fixed budget for 21,900 units of production shows sales of $547,500; variable costs of $65,700, and fixed costs of
$143,000
qs 21 - 4 (algo) flexible budget performance report lo p1
the companys actual sales were 26,900 units at $631,500. actual variable costs were $113,200 and actual fixed costs were $134,000
prepare a flexible budget performance report. indicate whether each variance is favorable or unfavorable.
note: indicate the effect of each variance by selecting favorable, unfavorable, or no variance.

Explanation:

Step1: Calculate the per - unit values for fixed budget

• Sales per unit:
• Given fixed budget sales of $S = 547500$ for $n = 21900$ units.
• Sales per unit $=\frac{547500}{21900}=25$
• Variable cost per unit:
• Given variable costs of $VC = 65700$ for $n = 21900$ units.
• Variable cost per unit $=\frac{65700}{21900}=3$

Step2: Calculate flexible budget values

• Flexible budget sales:
• Actual units $n_{a}=26900$, sales per unit $=25$
• Flexible budget sales $=25\times26900 = 672500$
• Flexible budget variable costs:
• Variable cost per unit $=3$, actual units $n_{a}=26900$
• Flexible budget variable costs $=3\times26900=80700$
• Flexible budget contribution margin:
• Contribution margin = Sales - Variable costs
• Flexible budget contribution margin $=672500 - 80700=591800$

Step3: Calculate variances

• Sales variance:
• Actual sales $=631500$, flexible budget sales $=672500$
• Sales variance $=631500 - 672500=-41000$ (unfavorable)
• Variable cost variance:
• Actual variable costs $=113200$, flexible budget variable costs $=80700$
• Variable cost variance $=113200 - 80700 = 32500$ (unfavorable)
• Contribution margin variance:
• Actual contribution margin $=631500-113200 = 518300$
• Flexible budget contribution margin $=591800$
• Contribution margin variance $=518300-591800=-73500$ (unfavorable)
• Fixed cost variance:
• Actual fixed costs $=134000$, fixed budget fixed costs (flexible budget fixed costs, since fixed costs are assumed to be constant within the relevant range) $=143000$
• Fixed cost variance $=134000 - 143000=-9000$ (favorable)

Answer:

Item	Flexible Budget	Actual Results	Variance	Favorable or Unfavorable
Variable Costs	$80700	$113200	$32500$	Unfavorable
Contribution Margin	$591800	$518300	$-73500$	Unfavorable
Fixed Costs	$143000	$134000	$-9000$	Favorable