Following is a summary of operating data of Bugs Company for the year 2013: Sale
ID: 2467292 • Letter: F
Question
Following is a summary of operating data of Bugs Company for the year 2013: Sales volume for 2014 is budgeted at 90% of 2013 sales volume. Prices are not expected to change. The 2014 budget amounts for the various other costs and expenses differ from those reported in 2013 only for the expected volume change in the variable items. Actual operating data for 2014 follow: Sales volume for 2014 is budgeted at 90% of 2013 sales volume. Prices are not expected to change. The 2014 budget amounts for the various other costs and expenses differ from those reported in 2013 only for the expected volume change in the variable items. Actual operating data for 2014 follow: a. Prepare a budget report comparing the planned operating budget for 2014 with the actual results for that year. b. Prepare a budget report that would be useful in pinpointing responsibility for the poor showing in 2014.Explanation / Answer
a) Comparing the actual and planned budget for 2014 Particulars Actuals Planned Variance Sales 5800000 6300000 -500000 Cost of goods manufactured and sold Direct material 1300000 1080000 220000 Direct Labour 1100000 990000 110000 Variable manufacturing Overhead 300000 270000 30000 Fixed manufacturing Overhead 780000 800000 -20000 Gross margin 2320000 3160000 -840000 Selling Expenses Variable 270000 270000 0 Fixed 290000 400000 -110000 General and Administrative Expenses Variable 110000 90000 20000 Fixed 1100000 1200000 -100000 Net operating income 550000 1200000 -650000 b) Flexible Operating budget Particulars Budget Sales 6300000 Cost of goods manufactured and sold Direct material 1080000 Direct Labour 990000 Variable manufacturing Overhead 270000 Fixed manufacturing Overhead 800000 Gross margin 3160000 Selling Expenses Variable 270000 Fixed 400000 General and Administrative Expenses Variable 90000 Fixed 1200000 Net operating income 1200000 Fixed Expenses does not change with change in the volume of goods produced and sold.