Enterprises manufactures tires for the Formula 1 motor racing circuit. For Augus
ID: 2533318 • Letter: E
Question
Enterprises manufactures tires for the Formula 1 motor racing circuit. For August
20142014?,
it budgeted to manufacture and sell
2 comma 8002,800
tires at a variable cost of
$ 73$73
per tire and total fixed costs of
$ 56 comma 500$56,500.
The budgeted selling price was
$ 107$107
per tire. Actual results in August
20142014
were
2 comma 6002,600
tires manufactured and sold at a selling price of
$ 110$110
per tire. The actual total variable costs were
$ 208 comma 000$208,000?,
and the actual total fixed costs were
$ 53 comma 500$53,500.
Requirements
1. Prepare a performance report that uses a flexible budget and a static budget.
2. Comment on the results in requirement 1.
Requirement 1. Prepare a performance report that uses a flexible budget and a static budget.
Begin with the actual? results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable.? (For variances with a? $0 balance, make sure to enter? "0" in the appropriate field. If the variance is? zero, do not select a? label.)
Actual
Results
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
Actual
Results
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
Explanation / Answer
Ans 1 & 2. Particulars Actual Results Flexible Budget Variance Comment Static Budget Variance Comment Units sold 2600 2600 0 0 2800 -200 Unfavourable Revenues 286000 278200 7800 Favourable 299600 -13600 Unfavourable (-) Variable cost 208000 189800 18200 Unfavourable 204400 3600 Favourable Contribution Margin 78000 88400 -10400 Unfavourable 95200 -17200 Unfavourable (-)Fixed Cost 53500 56500 -3000 Favourable 56500 -3000 Favourable Operating Income 24500 31900 -7400 Unfavourable 38700 -14200 Unfavourable
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