Q3SE - Horngren'S Financial And Managerial Accounting

Question

Calculating flexible budget variances

Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.

GRANT, INC.
Flexible Budget Performance Report (partial)
For the Month Ended April 30, 2018
	ActualResults	Flexible Budget Variance		Flexible Budget
Units	9,000	(a)		9,000
Sales Revenue	\(126,000	(b)	(c)	\)108,000
Variable Costs	\(52,300	(d)	(e)	\)50,300
Contribution Margin	\(73,700	(f)	(g)	\)57,700
Fixed Costs	\(16,100	(h)	(i)	\)14,900
Operating Income	\(57,600	(j)	(k)	\)42,800

Step-by-Step Solution

Answer

Actual operating income is greater than Flexible budgeted operating income by $14,800. It means the flexible budget variances is favourable.

Step 1:

A flexible budget variance is the distinction between the outcomes extracted by a flexible budget and actual outcomes.Favorable variances occurs when actual outcome exceed budgeted outcome. Unfavorable variances occurs when actual outcome fall below budgeted outcome.

Step 2:

GRANT, INC.
Flexible Budget Performance Report (partial)
For the Month Ended April 30, 2018
	ActualResults	Flexible Budget Variance		Flexible Budget
Units	9,000	0		9,000
Sales Revenue	$126,000	$18,000	F	$108,000
Variable Costs	$52,300	$2,000	F	$50,300
Contribution Margin	$73,700	$16,000	F	$57,700
Fixed Costs	$16,100	$1,200	F	$14,900
Operating Income	$57,600	$14,800	F	$42,800