Problem 1:
Davis Company provides the following information budgeted for 2007.
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Sale price
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$50 by unit
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Cost to manufacture variable
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$32 by unit
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Fixed cost of manufacture
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$100,000
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Fixed cost of sales and administrative
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$40,000
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Davies predicted that the sales will be of 20.000 units, but the current sales were 22,000 units. The current price of sale was of $ 48,50 by unit, and the costs current variables of production were of $33 by unit. Current fixed costs of production and fixed costs of sale and administrative they were of $104.000 and $39.000, respectively.
Required to do:
A) To utilize the form that appears subsequently, prepare the flexible budget; to present the current results; to determine the varying of the flexible budget; to indicate if the differences are favorable (F) or unfavorable (D).
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Flexible budget
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Current results
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variance
Budget
Flexible
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Favorable
or
Unfavorable
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Number of units
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Sales
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Variable costs of manufacture
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Contributive margin
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Fixed costs of manufacture
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Fixed costs of sales and administrative
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Net income
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B. To evaluate the performance of the business in comparison with the flexible budget.