Here are data for the stove division of Appliances Now, which produces and sells

Question

Here are data for the stove division of Appliances Now, which produces and sells a complete line of kitchen stoves:

4,783

5,541

$

2,241

$

1,764

The budget, set at the beginning of the year, was based on estimates of sales and costs. Administrative expenses include charges by corporate headquarters for providing strategic guidance. These fixed costs are allocated to divisions using revenues as the allocation base.

Assume that a different volume of stoves was sold than was budgeted, and prepare a flexible budget using the change in revenue to adjust the variable costs. Calculate budget variances?

   (    )    ____    ____    _____    ______

   ( ) _____    ____ _____    ______

( )    _____    _____ ____    _____

(    )    ______    ______    ____ _____

(    ) _____ _____ _____ ____

( )    _____    _____ _____ _____

( )    _____ ______ ____    $_____

  

(    ) $_____    $ _____    $______

Can chose (Revenues, Fixed selling expense, total costs, administrative expense, variable selling expense, fixed manufacturing cost, operating income, variable production cost) in the bracket.

(In thousands) Budget Actual Revenue $ 16,493 $ 17,474 Variable production costs 5,862 6,429 Fixed manufacturing costs 1,880 1,926 Variable selling expenses 452 546 Fixed selling expenses 1,275 1,268 Administrative expenses

4,783

5,541

Operating income

$

2,241

$

1,764

Explanation / Answer

Actual Revenue and spending variance Flexible budget Activity variance Static budget Revenue 17474 0 17474 981 16493 Expenses Variable production cost 6429 218 U 6211 349 U 5862 Fixed manufacturing cost 1926 46 U 1880 0 1880 Variable selling expense 546 67 U 479 27 U 452 Fixed selling expense 1268 F 1275 0 1275 Administrative expense 5541 474 U 5067 284 U 4783 Total cost 15710 798 U 14912 660 U 14252 Operating income 1764 798 U 2562 321 F 2241

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