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). The budgets prepared above were planned prior to the beginning of the year and are valid for the planned level of sales activity. If the actual level of sales activity differs from the planned level, comparing our budgets above with actual results may lead to incorrect conclusions about performance. Therefore we must prepare a FLEXBLE budget that adjusts revenues and expenses given the actual level of sales activity that occurred.

1) Fill in the Flexible budget based on actual sales for both size milkshakes.

2) Fill in the activity variance and the spending variance amounts as well as indicate whether they are favorable or unfavorable for both size milk shakes.

Large Milk Shakes - Flexible Budget Performance Report for the Month ended January 31 Activity Variances Spending Variances Planned Budget based on budgeted sales of 75,000 milk shakes Flexible budget based on actual sales of 85,000 milk shakes Actual results based on actual sales of 85,000 milk shakes Revenue ($9.00q) $675,000 $765,000 $210,750 $220,000 Less: Cost of goods sold ($2.819) Gross Profit $464,250 $545,000 8,764 10,317 Less: Operating expenses Operating Income $455,486 $534,683 $159,420 $187,139 Income tax expense (tax rate = 35%) Net Income $296,066 $347,544 1. Remember in the flexible budget column multiply actual sales by the budget/stardard cost of which I gave you in one number Cost of goods sold. 2. Operating expenses remain the same between the static and flexible budget as they do not change with changes in volume (sales level). Small Milk Shakes - Flexible Budget Performance Report for the Month ended January 31 Activity Variances Spending Variances Planned Budget based on budgeted sales of 50,000 milk shakes Flexible budget based on actual sales of 45,000 milk shakes Actual results based on actual sales of 45,000 milk shakes Revenue ($6.309) $315,000 $283,500 $109,000 $100,500 Less: Cost of goods sold ($2.189) Gross Profit $206,000 $183,000 5,843 5,928 Less: Operating expenses Operating Income $200,157 $177,072 $70,055 $61,975 Income tax expense (tax rate = 35%) Net Income $130,102 $115,097 Show tranccribed image toyt