(a-b) (a) Prepare a flexible budget for November. (Round unit answers to 2 decim

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(a-b)

(a) Prepare a flexible budget for November. (Round unit answers to 2 decimal places, e.g. 5.25 & all other answers to 0 decimal places, e.g. 125.)

Barnes Entertainment Corporation prepared a master budget for the month of November that was based on sales of 156,700 board games. The budgeted income statement for the period is as follows.
Sales Revenue $2,663,900 Variable expenses   Direct materials $689,480   Direct labor 282,060   Variable overhead 407,420 Total variable expenses 1,378,960 Contribution margin 1,284,940 Fixed overhead 254,200 Fixed selling and administrative expenses 506,000 Total fixed expenses 760,200 Operating income $524,740
During November, Barnes produced and sold 181,000 board games. Actual results for the month are as follows.
Sales Revenue $3,066,500 Variable expenses   Direct materials $783,500   Direct labor 339,400   Variable overhead 480,900 Total variable expenses 1,603,800 Contribution margin 1,462,700 Fixed overhead 271,100 Fixed selling and administrative expenses 506,000 Total fixed expenses 777,100 Operating income $685,600

Explanation / Answer

Selling price in flexible budget = Selling price in master budget

Selling price = 2,663,900 / 156,700 = 17

Number of units in the flexible budget = Actual number of units

Actual number of units = 181,000

Variable cost per unit in the flexible budget = Variable cost per unit in the master budget

Direct materials per unit = 689,480 / 156,700 = 4.4

Direct labour per unit = 282,060 / 156,700 = 1.8

Variable overhead per unit = 407,420 / 156,700 = 2.6

Fixed costs in flexible budget = Fixed costs in the master budget

Fixed overhead = 254,200

Fixed selling and administrative expenses = 506,000

Sales revenue (181,000 * 17) 3,077,000 Variable expenses Direct materials (181,000 * 4.4) 796,400 Direct labour (181,000 * 1.8) 325,800 Variable overhead (181,000 * 2.6) 470,600 Total variable expenses 1,592,800 Contribution margin 1,484,200 Fixed overhead 254,200 Fixed selling and administrative expenses 506,000 Total fixed expenses 760,200 Operating income 724,000

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