Assume that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 1,050 units for $725 each. During this month, the company incurred $567,000 total variable costs and $180,800 total fixed costs. The master (static) budget data for the month are as given in Exhibit 14.1.

1) Prepare a flexible budget for the production and sale of 1,050 units.

Units sold
Sales

Compute for October 2019:

a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U).

b. The sales volume variance, in terms of contribution margin. Indicate whether this variance was favorable (F) or unfavorable (U).

	Sales Volume Variance
Operating income		f or u
Contribution margin

3)

a.	The total flexible-budget (FB) variance		f or u
b.	The total variable cost flexible-budget variance		f or u
c.	The total fixed cost flexible-budget (FB) variance		f or u
d.	The selling price variance		f or u

SCHMIDT MACHINERY COMPANY Analysis of Operating Income For October 2019 (1) (2) (3) Actual Operating Income Master (Static) Budget Variances Units 780 1,000 2200 Sales $639,600 100% $800,000 100% $ 160,400U Variable costs 350.950 55 450,000 56 99,050F Contribution margin $288,650 45% $350,000 44% $ 61,350U Fixed costs 160,650 25 150,000+ 19 10,650U Operating income $128,000 20% $200,000 25% 72,000U