Problem
The Guatemala Refugee Association sells one kind of coffee to support its activities. It is in the process of preparing a flexible budget to determine why actual excess of revenue over expenses is below budgeted.
Task: Preepare a flexible budget and provide one plausible explanation for each volume and flexible budget variance.
Master budget Flexible budget Actual results Sales - units 20,000 18,500 Variable revenue $1,050,000 $972,000 Variable costs (500,000) (477,000) Contribution margin 550,000 495,000 Fixed costs (380,000) (375,000) (378,000) Excess of revenue over expenses $ 170,000 $117,000.