What was the total master static budget variance for the

Question

Master Budgets, Flexible Budgets, and Profit-Variance Analysis The Ono Tuna Company uses flexible budgets at the end of each period to evaluate the financial performance of each operating unit. As the accountant in charge, you have been asked to explain to management why actual results during the past year differed from the results contained in the master budget that was prepared before the start of the year.

Required

1. Fill in the missing amounts and labels. (Note: A and B are labels.)

	Actual Results	A?	Flexible Budget	B?	Master Budget
Units	205,000	C?	D?	E?	200,000
Sales revenues	$2,255,000	F?	$2,203,750	G?	H?
Variable costs	J?	$6,000U	I?	K?	$660,000
Fixed costs	$170,000	L?	$180,000	M?	N?
Operating income	O?	P?	Q?	R?	S?

2. What was the total master (static) budget variance for the period? How much of this variance was attributable to sales volume for the period being different from planned? How much is attributable to a combination of selling price, variable cost per unit, and spending on fixed costs being different from plans?

3. A production manager who is attending your presentation asks about the total flexible-budget vari- able cost variance of $6,000 (U) that was incurred during the past year. Explain how this variance might be further analyzed to provide managerial insight. Assume, for this problem, that there are only three variable costs for the company: direct materials, direct labor, and variable selling/administrative expenses.

4. What nonfinancial performance indicators might be appropriate in this context as part of a comprehen- sive performance-evaluation system?

Answer 1

For Financial accounting problem illustrated above, solve it for Flexible Budgets and Profit-Variance Analysis. The Ono Tuna Company employs flexible budgets at the end of each and every period to assess the financial performance of every operating unit. As accountant in charge, you have been asked to describe to management why actual outcomes throughout the past year differed from the outcomes contained in the master budget that was made before the beginning of year. Q1. Fill up missing amounts and labels. (Illustrated in table above) Q2. Determine the total master budget variance for the period? Illustrate how much of this variance was attributable to sales volume for the period being dissimilar from planned? How much is attributable to the combination of selling price, variable cost per unit and spending on fixed costs being dissimilar from plans? Q3. What non-financial performance indicators may be suitable in the context as part of comprehensive performance-assessment system?