Question
Problem 22-2 Making a flexible operating budget (L.O. 5) The computation of operating income for Frisco Company for 2018 follows: Sales$1,800,000 Cost of goods manufactured
Problem 22-2
Making a flexible operating budget (L.O. 5)
The computation of operating income for Frisco Company for 2018 follows:
Sales$1,800,000
Cost of goods manufactured and sold:
Direct materials $360,000
Direct labor 240,000
Variable manufacturing
overhead 120,000
Fixed manufacturing
overhead 240,000 960,000
Gross margin $840,000
Selling expenses:
Variable $132,000
Fixed 168,000 300,000
$540,000
Administrative expenses:
Variable $156,000
Fixed 192,000 348,000
Net operating income $192,000
An operating budget is prepared for 2019 with sales forecasted at a 25% increase in volume. Direct materials, direct labor, and all costs labeled as variable are completely variable. Fixed costs are expected to continue except for a $24,000 increase in fixed administrative costs. Actual operating data for 2019 are:
Sales $2,160,000
Direct
materials 444,000
Direct labor 288,000
Variable manufacturing
overhead 148,800
Fixed manufacturing
overhead 246,000
Variable selling
expenses 186,000
Fixed selling
expenses 157,200
Variable administrative
expenses 198,000
Fixed administrative
expenses 218,200
a.
I need help making a budget report comparing the 2019 planned operating budget with actual 2019 data.
b. I need help making a budget report that would be useful in appraising the performance of the various persons charged with responsibility to provide satisfactory income. (There was a hint: I need help making a budget data on a flexible basis and use the percentage by which sales were actually experienced.)
c. Comment on the differences revealed by the two reports.
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