Question 3 _(27 Marks) XYZ Company is a brewer that has two main products: light and draft beer. Its actual operating results and master budget estimates for 2019 are as follows: (000) 2019 Master Budget Light Draft Total 180 540 720 Light 2019 Actual Draft Total Barrels 240 360 600 Sales Variable costs Contribution margin Fixed costs Operating income $28,800 $62,100 $90,900 $14,400 $43,200 $57,600 $14,400 $18,900 $33,300 $15,000 $18,300 $36,000 $43,200 $79,200 $19,440 $29,160 $48,600 $16,560 $14,040 $30,600 $15,200 $15,400 Additional information is provided below: The budgeted variable cost per barrel consists of 40 liters of purified water at $2 per liter. For the year 2019, 22,200 liters of purified water were consumed. A market survey estimated the total industry sales to be 1,500,000 barrels during the year. At the end of 2019, the total sales for the industry were 1,200,000 barrels. Required: You must provide all the detailed supporting calculations. a. Prepare the 2019 Flexible Budget based on 2019 Master Budget and 2019 Actual information. (4 marks) b. Reconcile XYZ Company budgeted operating income in 2019 to the actual operating income in 2019 by computing all relevant variances for 2019. (20 marks) c. Based on your analysis of the 2019 results, provide some recommendations that would have been useful in the preparation of XYZ Company 2020 operating budget. (3 marks) Question 3 _(27 Marks) XYZ Company is a brewer that has two main products: light and draft beer. Its actual operating results and master budget estimates for 2019 are as follows: (000) 2019 Master Budget Light Draft Total 180 540 720 Light 2019 Actual Draft Total Barrels 240 360 600 Sales Variable costs Contribution margin Fixed costs Operating income $28,800 $62,100 $90,900 $14,400 $43,200 $57,600 $14,400 $18,900 $33,300 $15,000 $18,300 $36,000 $43,200 $79,200 $19,440 $29,160 $48,600 $16,560 $14,040 $30,600 $15,200 $15,400 Additional information is provided below: The budgeted variable cost per barrel consists of 40 liters of purified water at $2 per liter. For the year 2019, 22,200 liters of purified water were consumed. A market survey estimated the total industry sales to be 1,500,000 barrels during the year. At the end of 2019, the total sales for the industry were 1,200,000 barrels. Required: You must provide all the detailed supporting calculations. a. Prepare the 2019 Flexible Budget based on 2019 Master Budget and 2019 Actual information. (4 marks) b. Reconcile XYZ Company budgeted operating income in 2019 to the actual operating income in 2019 by computing all relevant variances for 2019. (20 marks) c. Based on your analysis of the 2019 results, provide some recommendations that would have been useful in the preparation of XYZ Company 2020 operating budget
