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Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $10. Lugo projects sales for April will be 2,000 packages, with sales increasing by 350 packages per month for May, June and July. On April 1. Lugo has 150 packages on hand but desires to maintain an ending inventory of 10% of the next month's sales. Prepare a sales budget and a production budget for Lugo for April, May, and June. Begin by preparing a sales budget for April, May, and June. Lugo Company Sales Budget April, May, and June April May June Budgeted packages to be sold 2,000 2,350 2,700 S Sales price per package 10 S 10 $ 10 S $ 20,000 S 23,500 $ $ 27,000 S Total sales Total 7,050 10 70,500 May June Total Now prepare a production budget for April, May, and June. Lugo Company Production Budget April, May, and June April Budgeted packages to be sold 2.000 Plus: 235 Desired packages in ending inventory Total packages needed 2.235 Less: Packages in beginning inventory 200 2035 Budgeted packages to be produced 2,350 270 2,700 305 7,050 810 2,620 7880 3,005 270 235 705 2,385 2.735 7155 Office Plus sells its main product, ergonomic mouse pads, for $12 each. Its variable cost is $5.10 per pad. Fixed costs are $215,000 per month for volumes up to 65,000 pads. Above 65,000 pads, monthly fixed costs are $265,000. Prepare a monthly flexible budget for the product, showing sales revenue, variable costs, fixed costs, and operating income for volume levels of 40,000, 55,000, and 70,000 pads. Office Plus Flexible Budget Budget Amounts Per Unit Units 40,000 55,000 70,000 Preston Company managers received the following incomplete performance report: (Click the icon to view the incomplete performance report.) Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning. Complete the performance report. (Enter a "0" for any zero balances. For any $0 variances, leave the Favorable (F)/Unfavorable (U) input blank.) Preston Pro Company Flexible Budget Performance Report For the Year Ended July 31, 2018 Flexible Sales Actual Budget Flexible Volume Static Results Variance Budget Variance Budget Units 42,000 42,000 11,000 F Sales Revenue $ 215,000 215,000 $ 22,000 F 84,000 77,000 4,000 U Variable Expenses Contribution Margin Fixed Expenses 138,000 18,000 F 131,000 109,000 22,000 102,000 0 $ Operating Income 36,000 $ 18,000 F Top managers of Stenback Industries predicted 2018 sales of 15,100 units of its product at a unit price of $6.00. Actual sales for the year were 14,900 units at $10.50 each. Variable costs were budgeted at $2.70 per unit, and actual variable costs were $2.80 per unit. Actual fixed costs of S41,000 exceeded budgeted fixed costs by $4,600. Prepare Stenback's flexible budget performance report. What variance contributed most to the year's favorable results? What caused this variance? Prepare a flexible bucikget performance report for the year. First, complete the flexible budget performance report through the contribution margin line, then complete the report through the operating income line. Finally, compute the total variances. (Enter a "0" for any zero balances. For any $0 variances, leave the Favorable (F/Unfavorable (U) input blank.) Stenback Industries Flexible Budget Performance Report For the Year Ended December 31, 2018 2 3 5 (1)-(3) (3) - (5) Budget Flexible Sales Amounts Actual Budget Flexible Volume Static Per Unit Results Variance Budget Variance Budget Units 1 4 Sales Revenue Variable Costs Contribution Margin
