Budgeted and Actual Income Statement Data for XRC Corp

Essay

Budgeted and actual income statement data for XRC Corp., which sells clerical clothing and supplies, appear below:
Budgeted Actual
Revenue $85,000 $80,750
Variable manufacturing costs 13,000 12,500
Fixed manufacturing costs 5,000 5,200
Variable selling expenses 22,000 19,000
Fixed selling expenses 3,000 3,100
Administrative expenses 7,000 7,000
Operating income $35,000 $33,950
The difference between the actual and budgeted amounts of revenue was created by differences between expected and actual unit sales.
a)Prepare a flexible budget based on actual revenue.
b)Calculate budget variances and indicate whether each variance is favourable or unfavourable.
c)Comment briefly on XRC's overall performance. Examine the relationships among the variances and develop one question for the manager about the variances and their relationships.