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EXHIBIT 14.1 Comparison of Actual and Budgeted Operating Income SCHMIDT MACHINERY COMPANY Analysis of Operating Income For October 2019 (1) (2) (3) Actual Operating Income Master (Static) Budget Variances Units 780 1.000 220U Sales $639,600 100% $800,000 100% $ 160,400U Variable costs 350.950 55 450.000 56 99,050F** Contribution margin $288,650 45% $350,000 44% $ 61,350U Fixed costs 160.650*** 25 150.000* 19 10,650U Operating income $128,000 $200,000 25% $ 72,000U 20% *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 1,110 units for $855 each. During this month, the company incurred $455,100 total variable costs and $182,000 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 1,110 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 1,110 units. Units sold Sales $ 0 $ 0 Complete this question by entering your answers in the tabs below. 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 Complete this question by entering your answers in the tabs below. 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
