Answer:
Flexible Contribution Margin <u>147,000</u>
<u>Actual </u>Contribution Margin <u>139,000</u>
<u>Variance 8000 unfavorable</u>
Explanation:
Engine Works Company
Flexible Budget Performance Report
For the year using the Contribution Margin Format
Actual Static Flexible
(21,000 units) (20,000 units) (21,000 units)
Sales …$651,000 $600,00 630,000 Fav
V. Cost of goods sold: 512,000 $ 460,000 483,000 Unfav
Direct materials .$231,000 $200,000 210,000
Direct labor 168,000 160,000 168,000
Variable overhead 73,500 60,000 63,000
Variable Operating Expenses 39,500 40,000 42,000
<u>Contribution Margin $139,000 140,000 147,000 Unfav</u>
Fixed Expenses
Fixed Operating Expenses 12,000 12000 12000
Fixed overhead 77,500 80,000 84,000
<u>Income from operations $ 49,500 $ 48,000 $51,000 Fav</u>
<u></u>
<u>Working</u>
Flexible Calculations = (600,000/20,000)*21,000= $ 630,000
V. Cost of goods sold= ($ 460,000 /20,000)*21,000= 483,000
Direct materials . = $200,000 /20,000)*21,000= 210,000
Direct labor = 160,000/20,000)*21,000= 168,000
Variable overhead = 60,000 /20,000)*21,000= 63,000
Variable Operating Expenses = 40,000 /20,000)*21,000= 42,000
All calculations are carried out in the same way. Dividing the amount in the given budget with the number of units and multiplying it with actual number of units.
Flexible Contribution Margin 147,000 and Actual Contribution Margin 139,000 which shows a Variance of 8000 which is unfavorable.
