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 (60050)300,0000
Gross profit300,000
Operating expenses:
Wages and salaries (10,000+ 10600) 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
Sample Solution