|
Actual results [A]] |
Flexible
Budget
Variance[A-B]
|
Flexible budget[B] |
sales volume variance[B-C] |
master budget[C] |
| Units |
3500 |
0 |
3500 |
300 F |
3200 |
| sales revenue |
252000 |
7000 F |
245000 [133000+112000] |
21000 F |
224000 |
| Variable cost |
135000 |
2000 U |
133000 |
11400 U |
121600 |
| contribution margin |
117000 |
5000 F |
112000 [20000+92000] |
9600 F |
102400 |
| Fixed cost |
22000 |
2000 U |
20000 |
0 |
20000 |
| operating income |
95000 |
3000 F |
92000 |
9600 F |
82400 |
Flexible budget is prepared for actual results.
**fixed cost remain constant (so it same under flexible and
master budget)
**variable cost under flexible budget = 121600*3500/3200 =
133000
**sales -variable cost= contribution
contribution -fixed cost = net income
This formula is to be modified as per requirement
**sales in master budget = 245000*3200/3500 = 224000
**Actual variable cost = variable cost under flexible budget
+Unfavorable variance
= 133000+2000 = 135000
