Douglas Company Provided the Following Budgeted Information for the Current

Essay

Douglas Company provided the following budgeted information for the current year. $\begin{array}{|l|r|}\hline \text { Sales price } & \$ 50 \text { per unit } \\\hline \text { Variable manufacturing cost } & 32 \text { per unit } \\\hline \text { Fixed manufacturing cost } & \$ 100,000 \text { total } \\\hline \text { Fixed selling and administrative cost } & \$ 40,000 \text { total } \\\hline\end{array}$ Douglas predicted that sales would be 20,000 units,but the sales actually were 22,000 units.The actual sales price was $48.50 per unit,and the actual variable manufacturing cost was $33 per unit.Actual fixed manufacturing cost and fixed selling and administrative cost were $104,000 and $39,000,respectively.
Required:
(a)Using the form below,prepare a flexible budget;show actual results;calculate the flexible budget variances;and indicate whether the variances are favorable (F)or unfavorable (U). $\begin{array}{|l|r|r|r|r|}\hline &\text { Flexible Budget } & \text { Actual Results } & \text { Flexible Budget } & \text { Favorable or }\\&&&\text {Variance } &\text {unfavorable} \\\hline \text { Number of units } &22,000 & 22,000 &0\\\hline \text { Sales Revenue } &1,100,000 & \$ 1,067,000& 33,000 \\\hline \text {Variable manufacturing costs } &704,000 & 726,000 & 22,000 \\\hline \text {Contribution margin } &396,000 & \$ 341,000& 55,000 \\\hline \text {Fixed manufacturing cost } &100,000 & 104,000 & 4,000 \\\hline \text {Fixed selling and administrative cost } &40,000 & 39,000&1,000 \\\hline \text {Net income } &256,000 & \$ 198,000& 58,000 \\\hline\end{array}$ (b)Assess the company's performance compared to the flexible budget.
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