P23-30B Preparing a flexible budget performance report Cell Plus Technologies manufactures capacitors for cellular base stations and other communication applications. The company's July 2018 flexible budget shows output levels of 8,500, 10,000, and 12,000 units. The static budget was based on expected sales of 10,000 units. CELL ONE TECHNOLOGIES Flexible Budget For the Month Ended July 31, 2018 Budget Amounts per Unit Units Sales Revenue $ 24 13 Variable Expenses Contribution Margin Fixed Expenses Operating Income 8,500 10,000 12,000 $ 204,000 $ 240,000 $288,000 110,500 130,000 156,000 93,500 110,000 132,000 57,000 57,000 57,000 $ 36,500 $ 53,000 $ 75,000 The company sold 12,000 units during July, and its actual operating income was as follows: CELL ONE TECHNOLOGIES Income Statement For the Month Ended July 31, 2018 Sales Revenue $ 295,000 Variable Expenses 161,100 Contributions Margin 133,900 Fixed Expenses 58,000 Operating Income $ 75,900 Requirements 1. Prepare a flexible budget performance report for July 2018. 2. What was the effect on Cell Plus's operating income of selling 2,000 units more than the static budget level of sales? 3. What is Cell Plus's static budget variance for operating income? Static Bud. Var. for Op. Inc. $22,900 F 4. Explain why the flexible budget performance report provides more useful information to Cell Plus's managers than the simple static budget variance. What insights can Cell Plus's managers draw from this performance report? Cell Plus Technologies Flexible Budget Performance Report Month Ended July 31, 2018 Flexible Budget Variance Sales Volume Variance Static (Master) Budget Budget Formula Actual Results Fav/Unfav Flexible Budget Fav/Unfav Units ales Revenue Fariable Expenses Contribution Margin Fixed Expenses Operating Income 2 3 managers more easily identify why there are variances and how to budget more effectively in the future