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Financial & Managerial Accounting
Found in: Page 971
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

City Company’s fixed budget performance report for July follows. The $647,500 budgeted total expenses include $487,500 variable expenses and $160,000 fixed expenses. Actual expenses include $158,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.

Fixed Budget Actual Results Variances

Sales (in units) 7,500 7,200

Sales (in dollars) $750,000 $737,000 $13,000 U

Total expenses 647,500 641,000 6,500 F

Income from operations $102,500 $96,000 $6,500 U

The income from operations is $4,000 (Favorable).

See the step by step solution

Step by Step Solution

Step 1: Meaning of Income Variance

The business entities compute income variance to determine the differences between the actual revenues generated from sales and the revenues expected to be generated during a particular period.

Step 2: Preparation of flexible budget performance report

ParticularsFlexible BudgetActual ResultsVariances
Sales 720,000737,00017,000 (F)
Less: Variable cost(468,000)(483,000)15,000 (U)
Contribution margin252,000254,0002,000 (F)
Less: Fixed cost (160,000)(158,000)2,000 (F)
Income from operations $92,000$96,000$4,000 (F)

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