5. What is the role of budgeting? List some purposes addressed by

budgeting and the reasons why organizations prepare budgets.

6. Complete the flexible budget for a manufacturing firm, shown

below, and provide plausible explanations for the variances.

Master

budget

Flexible

budget

Actual

results

Sales - units 25,000 20,000

Sales - revenue $1,250,000 $1,100,000

Variable expenses (600,000) (512,000)

Cont. margin 650,000 588,000

Fixed expenses (450,000) $(450,000) (458,000)

Income before tax $200,000 $130,000