Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 22

Flexible Budgets and Operating-Income Variance Analysis; Spreadsheet Application The following information is available for Brownstone Products Company for the month of July:

Required
1. Set up a spreadsheet to compute the July sales volume variance and the flexible-budget variance for the month in terms of both contribution margin and operating income.
2. Discuss implications of these variances on strategic cost management for Brownstone.
3. Configure your spreadsheet so that it will allow the firm to prepare pro forma budgets for activities within its relevant range of operations. Use your spreadsheet to prepare a flexible budget for each of the following two output levels:
a. 3,750 units.
b. 4,150 units.
(CMA Adapted)