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LO2 Preparing a Flexible Budget
SE 5. Prepare a flexible budget for 10,000, 12,000, and 14,000 units of output,
using the following information:
Variable costs
Direct materials $10.00 per unit
Direct labor $3.00 per unit
Variable overhead $5.00 per unit
Total budgeted fixed overhead $80,800
LO2 Flexible Budgets and Performance Evaluation
P 7. Cassen Realtors, Inc., specializes in the sale of residential properties. It earns
its revenue by charging a percentage of the sales price. Commissions for sales
persons, listing agents, and listing companies are its main costs. Business has
improved steadily over the last 10 years. Bonnie Cassen, the managing partner of
Cassen Realtors, receives a report summarizing the companys performance each
year. The report for the most recent year appears below.
Cassen Realtors, Inc.
Performance Report
For the Year Ended December 31
Difference
Budget Actual
Under (Over)
Budgeted*
Total selling fees $2,052,000 $2,242,200 ($190,200)
Variable costs
Sales commissions $1,102,950 $1,205,183 ($102,233)
Automobile 36,000 39,560 (3,560)
Advertising 93,600 103,450 (9,850)
Home repairs 77,400 89,240 (11,840)
General overhead 656,100 716,970 (60,870)
$1,966,050 $2,154,403 ($188,353)
Fixed costs
General overhead 60,000 62,300 (2,300)
Total costs $2,026,050 $2,216,703 ($190,653)
Operating income $ 25,950 $ 25,497 $ 453
*Budgeted data are based on 180 units sold.