Archer\'s cost accountant prepared the following static budget based on expected

Question

Archer's cost accountant prepared the following static budget based on expected activity of 4,000 units for the May 2016 accounting period: If Archer's sales manager were to prepare a flexible budget for expected activity of 4,300 units, budgeted net income on this flexible budget would be? If Archer actually produced and sold 4,300 units at $20 each, what is the sales revenue activity/volume variance? If Archer actually incurred the following costs during May 2016: What is the flexible budget variance for: indicate favorable/unfavorable for full credit Fixed costs: Variable costs: What is the Sales price variance:

Explanation / Answer

Archer   Budget Variance Static Budget Flexible Budget Actual Result Details Per unit Total Amt $ Per unit Total Amt $ Units                 4,000                4,300.00 Budget Details Sales Revenue        16.00             64,000         16.00                    68,800            86,000       17,200 F Variable Costs           8.50             34,000           8.50                    36,550            37,625          1,075 U Contribution Margin           7.50             30,000           7.50                    32,250            48,375 Fixed costs             18,000                    18,000            22,200          4,200 U Net Income             12,000                    14,250            26,175       11,925     1 Budgeted net Income on 4300 units level=      14,250     2 When actual qty sold =4300 Actual sales price =20 Budgeted sales price=16 Sales revenue Volume Variance= Budgeted Sales price*(Actual Qty Sold-Budgeted Qty of sale) =16*(4000-4300)=        4,800 Favorable     3 Flexible Budget Variances a. Fixed cost=22200-18000=        4,200 Unfavorable b. Variable costs=37625-36550=        1,075 Unfavorable

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