Managerial Accounting ABC Flexible Budgeted Income Statement Essay

Managerial Accounting ABC Flexible Budgeted Income Statement Essay\

Assignment Question(s):

Q1. ABC Inc. Has the flexible budgeted income statement for the period ended in December 31, 2019 at 600 units sold as follows:

Sales (100 price per unit*600 units)600,000

  • Cost of gold sold (600*50)300,0000
  • Gross profit300,000
  • Operating expenses:
  • Wages and salaries (10,000+ 10*600) 16,000
  • Supplies (5000+2*600)6,200
  • Insurance3,000
  • Total expenses25,200
  • Net operating income274,800
  • Cost of gold sold300,000
  • Gross profit350,000
  • Operating expenses:
  • Wages and salaries20,000
  • Supplies)7,000
  • Insurance3,000
  • Total expenses30,000
  • Net operating income320,000

Whereas the actual income statement for the period ended in December 31, 2019 at 600 units sold as follows:

Sales650,000

Required: compute the variance and specify whichever favorable and unfavorable variance is.

Answer:

Q2. Explain the inefficiencies of static budget and explain how did flexible budget overcome the these inefficiencies

Q3. List capital decision method and explain the criteria accepting or rejecting capital project under the present value method

Q4. Wages and salaries amounted to SR 30,000 and the flexible budget used quantities sold as cost driver for estimating wages and salaries as follows: SR5000+ SR 5 per unit sold. How much variance is for wages and salaries if the actual level of activity were at 3000 units sold?

A-SR 10,000 unfavorable variance

B-SR 10,000 favorable variance

C-SR 20,000 favorable variance

D-SR 20,000 unfavorable variance