Due to global warming, demand for milk shares was much larger than expected. The amount of large milk shakes actually sold in January were 85,000 (10,000 over budget) while the amount of small milk shakes actually sold in January were 45,000 (5,000 under budget). Therefore we must prepare a FLEXBLE budget that adjusts revenues and expenses given the actual level of sales activity that occurred.

Large Milk Shakes - Flexible Budget Performance Report for the Month ended January 31
	Planned Budget based on budgeted sales of 75,000 milk shakes	Activity Variances	Flexible budget based on actual sales of 85,000 milk shakes	Spending Variances	Actual results based on actual sales of 85,000 milk shakes
Revenue ($9.00q)	$675,000				$765,000
Less: Cost of goods sold ($2.81q)	$210,750				$220,000
Gross Profit	$464,250				$545,000
Less: Operating expenses	8,764				10,317
Operating Income	$455,486				$534,683
Income tax expense (tax rate = 35%)	$159,420				$187,139
Net Income	$296,066				$347,544