Davies Company Provided the Following Budgeted Information for 2012 Davies Predicted That Sales Would Be 20,000 Units, but the

Essay

Davies Company provided the following budgeted information for 2012. $$\begin{array} { | l | r | } \hline \text { Sales price } & \$ 50 \text { per unit } \\\hline \text { Variable manufacturing cost } & 32 \text { per unit } \\\hline \text { Fixed manufacturing cost } & \$ 100,000 \text { total } \\\hline \text { Fixed selling and administrative cost } & \$ 40,000 \text { total } \\\hline\end{array}$$
Davies 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). $$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Flexible } \\\text { Budget }\end{array} & \text { Actual Results } & \begin{array} { l } \text { Flexible Budget } \\\text { Variance }\end{array} & \begin{array} { l } \text { Favorable or } \\\text { unfavorable }\end{array} \\\hline \text { Number of units } & & & & \\\hline \text { Sales Revenue } & & & & \\\hline \begin{array} { l } \text { Variable } \\\text { manufacturing } \\\text { costs }\end{array} & & & & \\\hline \begin{array} { l } \text { Contribution } \\\text { margin }\end{array} & & & & \\\hline \begin{array} { l } \text { Fixed } \\\text { manufacturing cost }\end{array} & & & & \\\hline \begin{array} { l } \text { Fixed selling and } \\\text { administrative cost }\end{array} & & & & \\\hline \text { Net income } & & & & \\\hline\end{array}$$
b) Assess the company's performance compared to the flexible budget.