Question
Finance Management Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered
Finance Management Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget and actual results for September 2014 included these data:
The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results.
Requirements:
1. | Prepare a static-budget-based variance analysis of the September performance. |
2. | Prepare a flexible-budget-based variance analysis of the September performance. |
3. | Why might Finance Management find the flexible-budget-based variance analysis more informative than the static-budget-based variance analysis? Explain your answer. |
Requirement 1. Prepare a static-budget-based variance analysis of the September performance.
Begin with the actual results, then compute the static budget and the static-budget variances. Label each variance as favorable or unfavorable. (Enter an operating loss with a minus sign or parentheses.)
Actual | |
Results | |
Units sold | |
Revenues | |
Variable costs | |
Contribution margin | |
Fixed costs | |
Operating income (loss) |
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