Static and Flexible Budgets

Graham Corporation used the following data to evaluate its current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit.

Actual

Budgeted

Units sold

1,482,000

1,500,000

Variable costs

2,815,000

3,000,000

Fixed costs

2,490,000

2,425,000

a. Prepare the actual income statement, flexible budget, and static budget.

Do not use negative signs with any of your answers below.

Actual Results Flexible Budget Static Budget

Units sold

Revenues

Variable costs

Contribution margin

Fixed costs

Operating income

For questions b., c., and d., do not use negative signs with your answers. Select either U for Unfavorable or F for Favorable using the drop down box next to each of your variance answers.

b. What is the static-budget variance of revenues?

c. What is the flexible budget variance for variable costs?

d. What is the flexible budget variance for fixed costs?