Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 28

Flexible Budget and Operating Income Variances Assume that in June Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 950 units for $835 each. During this month the company incurred $475,000 total variable expenses and $180,000 total fixed expenses.
Required for the Month of June:
1. Prepare a flexible budget for the production and sale of 950 units.
2. Compute for June:
a. The sales volume variance, in terms of operating income.
b. The sales volume variance, in terms of contribution margin.
3. Calculate for June:
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.
EXHIBIT 14.1 Comparison of Actual and Budgeted Operating Income