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3 June, 17:48

Xion Co. budgets a selling price of $81 per unit, variable costs of $34 per unit, and total fixed costs of $280,000. During June, the company produced and sold 11,800 units and incurred actual variable costs of $361,000 and actual fixed costs of $295,000. Actual sales for June were $985,000. Prepare a flexible budget report showing variances between budgeted and actual results. List variable and fixed expenses separately. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance)

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  1. 3 June, 18:17
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    Answer and Explanation:

    The preparation of the flexible budget is presented below:

    Particulars Flexible budget Actual Variance Fav/Unfav

    Sales revenue $955,800 $985,000 $29,200 Fav

    (11,800 * $81)

    Less:

    variable cost $401,200 $361,000 $40,200 unfav

    (11,800 * $34)

    Contribution margin $554,600 $624,000 $69,400 fav

    Less:

    Fixed cost $280,000 $295,000 $15,000 unfav

    Operating income $274,600 $329,000 $54,400

    We simply applied the below formula

    Operating income = Sales - variable cost - fixed cost
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