EXHIBIT 14.1 Comparison of Actual and Budgeted Operating Income (3) Variances SCHMIDT MACHINERY COMPANY Analysis of Operating Income For October 2019 (1) (2) Actual Operating Income Master (Static) Budget Units 1.000 Sales $639.600 100% $800,000 100% Variable costs 350.950 55 450.000 Contribution margin $288.650 45% $350.000 44% Fixed costs 25 150,000+ 19 Operating income $128,000 20% $200.000 25% 780 220U* $ 160,400U 56 99,050F $ 61,350U 160.650*** 10.650U $ 72,000U *U denotes an unfavorable effect on operating income. **F denotes a favorable effect on operating income. ***Actual fixed factory overhead cost = $130,650; actual fixed selling and administrative costs = $30,000. #Budgeted fixed factory overhead cost = $120.000; budgeted fixed selling and administrative costs = $30,000. Assume that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 1,040 units for $715 each. During this month, the company incurred $457,600 total variable costs and $180,600 total fixed costs. The master (static) budget data for the month are as given in Exhibit 14.1. Required: 1. Prepare a flexible budget for the production and sale of 1,040 units. 2. Compute for October 2019: a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U). b. The sales volume variance, in terms of contribution margin. Indicate whether this variance was favorable (F) or unfavorable (U). 3. Compute for October 2019: a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) or unfavorable (U). c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a flexible budget for the production and sale of 1,040 units. Units sold Sales Variable expenses Contribution margin Fixed expenses Budgeted operating income $ 0 $ 0 Required 1 Required 2 Required 3 Compute for October 2019: a. The sales volume variance, in terms of operating income. Indicate whether this variance was favorable (F) or unfavorable (U) b. The sales volume variance, in terms of contribution margin. Indicate whether this variance was favorable (F) or unfavorable (U). Show less Sales Volume Variance Operating income Contribution margin Required 1 Required 2 Required 3 Compute for October 2019: a. The total flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). b. The total variable cost flexible-budget variance. Indicate whether this variance was favorable (F) or unfavorable (U). c. The total fixed cost flexible-budget (FB) variance. Indicate whether this variance was favorable (F) or unfavorable (U). d. The selling price variance. Indicate whether this variance was favorable (F) or unfavorable (U). Show less a. The total flexible-budget (FB) variance b. The total variable cost flexible-budget variance c. The total fixed cost flexible-budget (FB) variance d. The selling price variance
