Answer:
Explanation:
1. Prepare a static-budget based variance analysis of the September performance
Actual Static-Budget Static
Results Variances Budget
-1 (2) = (1) – (3) -3
Units sold 12,000 3,000 U 15,000
Revenue $252,000^a $ 48,000 U $300,000c
Variable costs 84,000^d 36,000 F 120,000f
Contribution margin 168,000 12,000 U 180,000
Fixed costs 150,000 5,000 U 145,000
Operating income $18,000 $ 17,000 U $35,000
$17,000 U
Total static-budget variance
b.
2. Prepare a flexible budget based variance analysis of the September performance
Flexible- Sales
Actual Budget Flexible Volume Static
Results Variances Budget Variances Budget
(1) (2) = (1) – (3) (3) (4) = (3) – (5) (5)
Units sold 12,000 0 12,000 3,000 U 15,000
Revenue $252,000a $12,000 F $240,000b $60,000 U $300,000c
Variable costs 84,000 12,000F 96,000e 24,000 F 120,000f
Contribution margin 168,000 24,000 F 144,000 36,000 U 180,000
Fixed costs 150,000 5,000 U 145,000 0 145,000
Operating income $18,000 $19,000 F ($1,000) $36,000 U $35,000
$19,000 F $36,000 U
Total flexible-budget Total sales-volume
variance variance
$17,000 U
Total static-budget variance
The letters below represents
a 12,000 × $21 = $252,000 d 12,000 × $7 = $84,000
b 12,000 × $20 = $240,000 e 12,000 × $8 = $96,000
c 15,000 × $20 = $300,000 f 15,000 × $8 = $120,000
3.. flexible budget based variance analysis is an offshoot of static budget based variance analysis.Static budget will not be considered because there is a reduction in volume from 15000 t0 12000. Also flexible budget allows the management to make some changes as per assumptions while static budget is the same the changes from the assumption notwithstanding.
