Bellaton Industries is a manufacturing company located in Europe that has just completed the first month of a new fiscal year. The Finance Department is reviewing the variance of actual results to the master budget. The expenditure within the marketing and facilities departments makes up most of the fixed costs. The sales operations department is responsible for revenue. The actual results and master budget are shown below.

Bellaton Budget

Actual Master Budget

Units Sold $18,00016,000$

Revenue $1,512,0001,360,000$

Variable Cost

Direct Material $(792,000)(672,000)$

Direct Labor $(252,000)(240,000)$

Variable Overhead $(144,000)(128,000)$

Contribution Margin $324,000320,000$

Fixed Cost $(210,000)(215,000)$

Operating income $114,000105,000$

Question $1.$ Prepare a flexible budget based on the actual sales volume $($Negative amounts should be indicated with a minus sign$)$

Budget

Units Sold

Revenue

Variable Cost

Direct Material

Direct Labor

Variable Overhead

Contribution Margin

Fixed Costs

Operating Income

Question $2$

Calculate the flexible budget variances by comparing actual results to the flexible budget. $($Negative amounts should be indicated with a minus sign$)$

Actual Results Flexible Budget Variance $($Amount$)($U or F$)$

Units Sold

Revenue

Variable Costs

Direct Material

Direct Labor

Variable Overhead

Contribution Magin

Fixed Cost

Operating Income

Question $3$: Explain the significance of these variances.

Question $4$: Identify and describe three benefits of measuring performance by comparing actual results to the master budget.

Question $5$: Identify and describe one limitation of measuring performance by comparing actual results to the master budget.

Question $6$: Identify and describe the different types of responsibility centers.

Question $7$: Identify the responsibility centers in the scenario.