The actual information pertains to the month of September. As part of the budget

Question

The actual information pertains to the month of September. As part of the budgeting process, Kriger Fencing Company developed the following static budget for September. Kriger is in the process of preparing the flexible budget and understanding the results.

Actual Flexible Static
Results Budget Budget
Sales volume (in units) 10,000 12,500

Sales revenues $500,000 $ $625,000
Variable costs 256,000 $ ________ 300,000

Contribution margin 244,000 $ 325,000

Fixed costs 229,000 $ ________ 225,000
Operating profit $ 15,000 $ $ 100,000

The primary reason for low operating profits was ________.

A) lower sales volume than planned

B) a poor management accounting system

C) increased fixed costs

D) the variable-cost variance

Please pick one

Explanation / Answer

Statement showing computations Actual Static % Change Particulars Amount per unit Amount per unit Sales Volume in units            10,000.00            12,500.00 20.00% Sales Revenues         500,000.00                    50.00         625,000.00                    50.00 Variable costs         256,000.00                    25.60         300,000.00                    24.00 ContributionMargin         244,000.00                    24.40         325,000.00                    26.00 Fixed Costs         229,000.00         225,000.00 Operating Profit            15,000.00         100,000.00 A) lower sales volume than planned   since we can see that sales volume is lower by 20% however there is not much diff in Variable cost per unit and Fixed Costs

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