Flexible budget, working backward. The Specialty Balls Company designs and manufac¬

tures ball bearings for extreme performance machinery. The following table is a partially com¬

pleted variance analysis of Specialty Balls budgeted and actual results from sales of platinum balls for the year ended December 31, 2007.

Variance Analysis for Specialty Balls for 2007, Incomplete Actual Results

(1)

Flexible-Budget Variances

(2) = (1) - (3)

Flexible Budget

(3)

Sales-Volume Variances

(4) = (3) - (5)

Static Budget

(5)

Units sold 650,000 600,000 Revenues (sales) $4,290,000 $2,520,000 Variable costs 3,090,000 1,440,000 Contribution margin 1,200,000 1,080,000 Fixed costs 840,000 720,000 Operating income $ 360,000 $ 360,000 Total flexible-budget variance Total sales-volume variance Total static-budget variance Required 1. Complete the variance analysis. Calculate all the required variances. Ifyour work is accurate, you will find that the total static-budget variance is $0 (zero).

2. What are the actual and budgeted prices per unit? What are the actual and budgeted costs per unit?

3. Specialty Balls’s CEO was delighted with the lack of a static-budget variance. Was his reaction appropriate? Review the variances you have calculated and discuss possible causes and potential problems.