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 3 Required: 1. Prepare a flexible budget for the production and sale of 1,050 units 2. 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). 3. Compute for October 2019: a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) or unfavorable (U). c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a flexible budget for the production and sale of 1,050 units. Units sold Sales S 0 S Required 1 Required 2 Required 2 Required 1 Required 3 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) W Show less Sales Volume Variance Operating income Contribution margin Required 1 Required 3 Required 1 Required 2 Required 3 Compute for October 2019 a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) or unfavorable (U). c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U) d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U). Show less a The total flexible-budget (FB) variance b. The total variable cost flexible-budget variance c. The total fixed cost flexible-budget (FB) variance d. The selling price variance Required 2 Required 3 Comparison of Actual and Budgeted Operating Income EXHIBIT 14.1 SCHMIDT MACHINERY COMPANY Analysis of Operating Income For October 2019 (1) (2) (3) Actual Operating Income Master (Static) Budget Variances Units 780 1,000 220U $ 160,400U $639,600 100% $800,000 100% Sales 99.050F Variable costs 350,950 55 450,000 56 45% Contribution margin $288,650 44% $ $350,000 61,350U 160.650* 150,000f Fixed costs 25 19 10,650U $ 72,000U Operating income $128,000 20% 25% $200,000 operating income. TT denotes an unfavorable effect on **F denotes a favorable effect on operating income **Actual fixed factory overhead cost $130,650; actual fixed selling and administrative costs $30,000. tBudgeted fixed factory overhead cost $120,000; budgeted fixed selling and administrative costs $30,000. 3
