Main Street Muffins sells its muffins to restaurants and coffee houses for an av

Question

Main Street Muffins sells its muffins to restaurants and coffee houses for an average selling price of $26 per case. The following information relates to the budget for Main Street Muffins for this year (all figures are annual totals unless otherwise noted): (B) (Click the icon to view the budget information.) During the year, Main Street Muffins actually sold 7,500 cases resulting in total sales revenue of $202,200. Actual expenses (in total) from this year are as follows: Click the icon to view the actual expenses.)

Explanation / Answer

Flexible budget will be prepared for 7,500 cases that have actually been sold.

Flexible budget explanation: all amounts are calculated for 7500 cases. sales = 7500*26 = 195000. Variable operating expenses = 7500 cases*amount as per the budget i.e $3 packaging expense per case. so total = 7500*3 = 22500. Fixed operating expenses are kept as the same as given in the master budget as these expenses are fixed and thus will remain unchanged.

variance = actual - budgeted. variance is favorable (F) if actual revenue>budgeted revenue and unfavorable (U) otherwise. If actual expense<budgeted expense, variance is  favorable (F), otherwise unfavorable (U).

Flexible budget variance = actuals - flexible budget for 7500 cases.

volume variance is the variance between the actual quantity and the budgeted quantity at the budgeted price. variance = actual - budgeted. variance is favorable (F) if actual revenue>budgeted revenue and unfavorable (U) otherwise. If actual expense<budgeted expense, variance is  favorable (F), otherwise unfavorable (U).

Thus, volume variance for sales = (actual quantity sold - budgeted quantity sold)*budgeted price. = (7500-7300)*26.

expenses volume variance:  (actual quantity sold - budgeted quantity sold)*budgeted cost per unit. so for packaging it would be = (7500-7300)*3. Similarly for other variable expenses. sales commission variance = 5% of revenue volume variance = 0.05*5200 = 260

Actual 7500 cases Flexible budget variance Flexible budget 7500 cases volume variance Master budget 7300 cases Sales revenue 202,200.00 7,200.00 F 195,000.00 5,200.00 F 189,800.00 Variable operating expenses Packaging expenses 22,800.00 300.00 U 22,500.00 600.00 U 21,900.00 Shipping expenses 32,600.00 2,600.00 U 30,000.00 800.00 U 29,200.00 Sales commission 10,110.00 360.00 U 9,750.00 260.00 U 9,490.00 Fixed operating expenses Salaries 7,500.00 1,000.00 U 6,500.00 0.00 6,500.00 Office rent 3,100.00 0.00 3,100.00 0.00 3,100.00 Depreciation 2,900.00 0.00 2,900.00 0.00 2,900.00 Insurance 900.00 600.00 F 1,500.00 0.00 1,500.00 Office supplies 1,200.00 400.00 U 800.00 0.00 800.00 Total operating expenses 81,110.00 4,060.00 U 77,050.00 1,660.00 U 75,390.00

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.