Problem:
The Cabazos Company is in the process of preparing a flexible budget to determine why operating profit fell below the budgeted amount. Complete the following flexible budget and list the reasons for the variance between budgeted and actual profit.
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Master Budget
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Flexible budget
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Actual Results
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Sales volume (in units)
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20,000
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18,000
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Sales Revenue
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$1,050,000
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$972,000
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Variable costs
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500,000
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477,000
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Contribution margin
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550,000
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495,000
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Capacity-related (fixed) costs
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380,000
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385,000
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Operating profit
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$170,000
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$110,000
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Additional Information:
This question is basically belongs to the Finance as well as it explains about computation of flexible budget as well as reason for variance between budgeted and real profit.