Case 23.1 Western Outfitters Mountain Sports projected 2008 sales of 75,000 unit

Question

Case 23.1 Western Outfitters Mountain Sports projected 2008 sales of 75,000 units at a unit sale price of $12.00. Actual 2008 sales were 72,000 units at $14.00 per unit. Actual variable costs, budgeted at $4.00 per unit, totaled $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000 1) Refer to Case 23.1. What is the sales volume variance for total revenue? 2) Refer to Case 23.1. What is the flexible budget variance for variable expenses? 3) Refer to Case 23.1. What is the flexible budget variance for total expenses? 4) Refer to Case 23.1. What is the flexible budget variance for operating income? 5) Refer to Case 23.1. What is the sales volume variance for operating income?

Explanation / Answer

  

GIVEN,     BUDGETED UNITS (BQ) = 75,000 BUDGETED PRICE (BP)   = $12 ACTUAL QUANTITY (AQ) = 72,000 BUDGETED QUANTITY(BQ) = 75,000 ACTUAL PRICE (AP) = $14 BUDGETED PRICE (BP) = $12 BUDGETED VARIABLE EXPENSE PER UNIT(BVEPU) = $4 ACTUAL VARIABLE EXPENSE PER UNIT = $4.75 BUDGETED FIXED EXPENSE = $375,000 ACTUAL FIXED EXPENSE = $400,000 1 SALES VOLUME VARIANCE = STANDARD SALES MINUS BUDGETED SALES OR = BP*AQ MINUS BP*BQ = 864000 MINUS 900000 = -36000 ADVERSE/UNFAVOURABLE 2 FLEXIBLE BUDGET VARIANCE FOR VARIABLE EXPENSES = BUDGETED VARIABLE EXPENSE FOR ACTUAL OUTPUT - ACTUAL VARIABLE EXPENSE = $288,000 - $342,000.00 = -54,000 ADVERSE/UNFAVOURABLE 3 FLEXIABLE BUDGET VARIANCE FOR TOTAL EXPENSE = BUDGETED EXPENSE FOR ACTUAL OUTPUT - ACTUAL EXPENSE = $288,000 + $375,000 MINUS $342,000.00 + $400,000 $79,000.00 ADVERSE/UNFAVOURABLE 4 FLEXIABLE BUDGET VARIANCE FOR OPERATING INCOME = BUDGETED OPERATING INCOME MINUS ACTUAL OPERATING INCOME = 201000 - $266,000 = $65,000 FAVOURABLE VARIANCE 5 SALES VOLUME VARIANCE FOR OPERATING INCOME = = $225,000 - 201000 = $24,000 ADVERSE/UNFAVOURABLE

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