6.27

Preparing flexible budgets (CMA adapted) (LO 1) Barnes Entertainment Corporation prepared a master budget for the month of November that was based on sales of 150,000 board games. The budgeted income statement for the period is as follows.

Sales Revenue		$2,400,000
Variable expenses
Direct materials	$675,000
Direct labor	300,000
Variable overhead	450,000
Total variable expenses		1,425,000
Contribution margin		975,000
Fixed Expenses
Fixed overhead	250,000
Fixed selling and administrative expenses	500,000
Total fixed expenses		750,000
Operating income		$225,000

During November, Barnes produced and sold 180,000 board games. Actual results for the month are as follows.

Sales Revenue		$2,870,000
Variable expenses
Direct materials	$798,000
Direct labor	375,000
Variable overhead	550,000
Total variable expenses		1,723,000
Contribution margin		1,147,000
Fixed Expenses
Fixed overhead	270,000
Fixed selling and administrative expenses	500,000
Total fixed expenses		770,000
Operating income		$377,000

Required

(a)	Prepare a flexible budget for November.

(b)	Calculate Barnes's static budget variance for November.

(c)	Will the static budget variance that you calculated in part (b) be useful to management? Why or why not?

(d)	Based on the available information, prepare a performance report for management.

(e)	Comment on the results of your report.