Crafts Inc., is a manufacturer of furniture.
The company has 2 responsibility centers: Production and Selling and Distribution.
Production and administration are cost centers while Selling and Distribution is a profit center.
Presented below are the budgeted and actual contribution income statement for October along with applicable unit information.
Budgeted unit information:
Units	900
Sale price per unit	$245
Direct material per unit	$48
Direct labor per unit	$18
Variable manufacturing overhead per unit	$16
Variable selling and distribution per unit	$45
Actual Units:	850
	Craft Inc.
	Budgeted Contribution Income Statement
	For Month of October
Sales				$ 220,500
Less Variable costs
Variable cost of goods sold:
	Direct materials	$ 43,200
	Direct labor	16,200
	Manufacturing overhead	14,400	$ 73,800
Selling and distribution			40,500	(114,300)
Contribution Margin				106,200
Less Fixed Costs:
	Manufacturing overhead		40,000
	Selling and Distribution		30,000	(70,000)
Net Income				36,200
	Craft Inc.
	Actual Contribution Income Statement
	For Month of October
Sales				$ 230,000
Less Variable costs
Variable cost of goods sold:
	Direct materials	$ 46,000
	Direct labor	25,000
	Manufacturing overhead	20,000	$ 91,000
Selling and distribution			39,000	(130,000)
Contribution Margin				100,000
Less Fixed Costs:
	Manufacturing overhead		38,000
	Selling and Distribution		40,000	(78,000)
Net Income(Loss)				22,000
Required:
1. Prepare a flexible budget performance report for Production that compares actual and allowed costs.
2. Prepare a flexible budget performance report for selling and distribution that compares actual and allowed costs.
6. Explain to management the areas that should be investigated. You should also include why the actual income is less than budgeted Explain why you picked these areas to look at.