The following information is available for Brownstone Products Company for the m

Question

The following information is available for Brownstone Products Company for the month of July: Actual Master Budget Units Sales revenue Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative expenses Fixed selling and administrative expenses 3,500 $54,300 10,000 13,000 6,500 8,000 4,000 $60,000 16,000 14,000 8,000 9,100 Required 1. Compute the July sales volume variance and the flexible-budget variance for the month in terms of both contribution margin and operating income. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Flexible-Budget Variance Sales Volume Variance Contribution margin Operating income 3. Prepare pro forma budgets for activities within its relevant range of operations and prepare a flexible budget for each of the following two output levels a. 3,560 units b. 3,980 units Flexible budget (a.) Flexible budget (b Master Budget Units Sales Variable costs 4,000 $ 60,000 16,000 8,000 0 S 24,000 0 S 36,000 Manufacturing Selng and administrative Total variable costs Contribution margin Fixed costs 14,000 9,100 0 S 23,100 0 S 12,900 Manufacturing Selng and administrative Total fixed costs Operating income

Explanation / Answer

Answer 1. Actual Flexible Budget Variance Flexible Budget Sales Volume Variance Master Budget Units (q)           3,500.00          3,500.00             4,000.00 Sales Revenue         54,300.00           1,800.00 (F)        52,500.00         7,500.00 (U)           60,000.00 Variable Costs: Manufacturing Costs         10,000.00           4,000.00 (F)        14,000.00         2,000.00 (F)           16,000.00 Selling and Administrative Expenses           6,500.00           6,500.00 (F)          7,000.00         1,000.00 (F)             8,000.00 Total Variable Expense         16,500.00        10,500.00 (F)        21,000.00         3,000.00 (F)           24,000.00 Contribution Margin         37,800.00           6,300.00 (F)        31,500.00         4,500.00 (U)           36,000.00 Fixed Costs: Manufacturing Costs         13,000.00           1,000.00 (F)        14,000.00                      -             14,000.00 Selling and Administrative Expenses           8,000.00           1,100.00 (F)          9,100.00                      -               9,100.00 Total Fixed Costs         21,000.00           2,100.00 (F)        23,100.00                      -             23,100.00 Net Operating Income         16,800.00           8,400.00 (F)          8,400.00         4,500.00 (U)           12,900.00 Flexible Budget Variance Sales Volume Variance Contribution Margin               6,300.00 (F)             4,500.00 (U) Operating Income               8,400.00 (F)             4,500.00 (U) Answer 3. Flexible Budget (a) Flexible Budget (B) Master Budget Units (q)           3,560.00         3,980.00      4,000.00 Sales Revenue        53,400.00      59,700.00    60,000.00 Variable Costs: Manufacturing Costs        14,240.00      15,920.00    16,000.00 Selling and Administrative Expenses           7,120.00         7,960.00      8,000.00 Total Variable Expense        21,360.00      23,880.00    24,000.00 Contribution Margin        32,040.00      35,820.00    36,000.00 Fixed Costs: Manufacturing Costs        13,000.00      14,000.00    14,000.00 Selling and Administrative Expenses           8,000.00         9,100.00      9,100.00 Total Fixed Costs        21,000.00      23,100.00    23,100.00 Net Operating Income        11,040.00      12,720.00    12,900.00

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