Finance Organizer Printers, Inc., produces luxury checkbooks with three checks a
ID: 2519775 • Letter: F
Question
Finance Organizer Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget for September 2017 included these data: (Click the icon to view the operating budget and actual results.) The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results. Finance Organizer develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs. Read the requirements.Explanation / Answer
Answer
Actual Results [12900 checkbooks]
Static Budget variance
Static Budget [16000 checkbooks]
Units Sold
12900
3100
Unfavourable
$16000
Revenues
$270900
49100
Unfavourable
$320000
(-) variable cost
$64500
31500
Favourable
$96000
Contribution margin
$206400
17600
Unfavourable
$224000
(-) Fixed cost
$125800
5800
Unfavourable
$120000
Operating Income (Loss0
$80600
23400
Unfavourable
$104000
Actual Results [12900 checkbooks]
Flexible Budget variance
Flexible Budget
Sales Volume variance
Static Budget [16000 checkbooks]
Units Sold
12900
0 – None
12900
3100 Unfavourable
16000
Revenues
$270900
12900 Favourable
$258000
62000 Unfavourable
$320000
(-) variable cost
$64500
12900 Favourable
$77400
18600 Favourable
$96000
Contribution margin
$206400
25800 Favourable
$180600
43400 Unfavourable
$224000
(-) Fixed cost
$125800
5800 Unfavourable
$120000
0 None
$120000
Operating Income (Loss0
$80600
20000 Favourable
$60600
43400 Unfavourable
$104000
Actual Results [12900 checkbooks]
Static Budget variance
Static Budget [16000 checkbooks]
Units Sold
12900
3100
Unfavourable
$16000
Revenues
$270900
49100
Unfavourable
$320000
(-) variable cost
$64500
31500
Favourable
$96000
Contribution margin
$206400
17600
Unfavourable
$224000
(-) Fixed cost
$125800
5800
Unfavourable
$120000
Operating Income (Loss0
$80600
23400
Unfavourable
$104000
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