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Financial & Managerial Accounting
Found in: Page 970
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Solitaire Company’s fixed budget performance report for June follows. The $315,000 budgeted expenses include $294,000 variable expenses and $21,000 fixed expenses. Actual expenses include $27,000 fixed expenses. Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately.

Fixed Budget Actual Results Variances

Sales (in units) 8,400 10,800

Sales (in dollars) $420,000 $540,000 $120,000 F

Total expenses 315,000 378,000 63,000 U

Income from operations $105,000 $162,000 $57,000 F

The income from operations is $21,000 (Favorable).

See the step by step solution

Step by Step Solution

Step 1: Meaning of Income from Operations

In accounting, income from operations or operating income denotes the revenues generated from the primary activities of a business concern. It generally includes the sale and purchase of goods or services.

Step 2: Preparation of flexible budget performance report

ParticularsFlexible BudgetActual ResultsVariances
Less: Variable expenses 378,000351,00027,000 (F)
Contribution margin162,000189,00027,000 (F)
Less: Fixed expenses21,00027,0006,000 (U)
Income from operations 141,000162,000162,000

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