Bank AssistantBank Assistant

Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget and actual results for September

20142014

included these data:

The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results. Bank AssistantBank Assistant develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs.

The budgeted amounts for September

20142014

were:

Number of checkbooks	14,000
Selling price per book	$23
Variable cost per book	$9
Fixed costs for the month	$155,000

The actual results for September

20142014

were as follows:

Number of checkbooks produced and sold

10,500

Average selling price per book

$24

Variable cost per book

$7

Fixed costs for the month

Requirement 1. Prepare a static-budget-based variance analysis of the September performance.

Begin with the actual results, then compute the static budget and the static-budget variances. Label each variance as favorable or unfavorable. (Enter an operating loss with a minus sign or parentheses.)

	Actual
	Results
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income (loss)

Static-Budget		Static
Variances		Budget

Requirement 2. Prepare a flexible-budget-based variance analysis of the September performance.

Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable. (For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label. Enter operating losses with a minus sign or parentheses.)

	Actual
	Results
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income (loss)

Flexible-Budget		Flexible
Variances		Budget

Sales-Volume		Static
Variances		Budget

Requirement 3. Why might

Bank AssistantBank Assistant

find the flexible-budget-based variance analysis more informative than the static-budget-based variance analysis?

The flexible-budget

breaks down

takes a high-level look at

the static-budget variance. This allows the managers to see the portion of the variance that arose because sales price and costs were either higher or lower than expected, as shown in the

flexible-budget variance

sales volume variance

column, and the portion of the variance that arose because the sales volume was different than expected, as shown in the

flexible-budget variance

sales-volume variance

column.

The primary reason for the

favorable

unfavorable

static-budget variance is the

increase

decrease

in unit volume. One explanation for this change is the

increase

decrease

actual selling price from the budgeted price. Variable costs

increased

decreased

relative to the flexbile budget, which could be due to

efficient

inefficient

management or using

higher

lower

quality materials.

$158,000