Solution Library

Calculate Flexible Budget

Question

The Cabazos Company is in the process of preparing a flexible budget to determine why operating profit fell below the budgeted amount. Complete the following flexible budget and list the reasons for the variance between budgeted and actual profit.

 

Master Budget

Flexible budget

Actual Results

Sales volume (in units)

20,000

 

18,000

 

 

 

 

Sales Revenue

$1,050,000

 

$972,000

Variable costs

500,000

 

477,000

Contribution margin

550,000

 

495,000

Capacity-related (fixed) costs

380,000

 

385,000

Operating profit

$170,000

 

$110,000

 

Summary

The question belongs to Finance and it discusses about calculation of flexible budget and reason for variance between budgeted and real profit.

Total Word Count 90

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