A company has performed the following analysis for its operations PROFIT VARIANC

Question

A company has performed the following analysis for its operations PROFIT VARIANCE ANALYSIS REPORT Flexible Budget Variance Sales Volume Variance Actual Flexible Master Results Budget Budget Units Sold 20,000 20,000 5,000 U 25,000 Sales 120,000 137,500 Variable Cost 2,000 U 50,000 12,500 F 62,500 Cont. Margin 15,000 U 75,000 Fixed Cost 30,000 5,000 F 35,000 35,000 Operating Income 13,000 F 15,000 U$ 40,000 The sales for the flexible budget (A) should be Select one O a. $110,000 b. $120,000 O c. $125,000 O d. $137,500

Explanation / Answer

Answer is $110,000.

Master Budget:

Number of units sold = 25,000
Sales = $137,500

Sales per unit = Sales / Number of units sold
Sales per unit = $137,500 / 25,000
Sales per unit = $5.50

Flexible Budget:

Sales per unit = $5.50
Number of units sold = 20,000

Sales = Sales per unit * Number of units sold
Sales = $5.50 * 20,000
Sales = $110,000

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