Does anyone have a more efficient way to solve this?
Mo' Joe Coffee Houses budgeted sales of 120,000 units of its premier coffee at $3.50 per unit for the year ended December 31, 20X4, and anticipated a contribution margin ratio of 25% with fixed costs of $50,000. Actual results reflected intense price competition resulting in reduced sales (90,000 units). Unit selling price fell to $2.80, and increased costs reduced contribution margins to 20%. Actual fixed costs materialized at $55,000. The actual financial and volume results displayed in comparison to the master budgets are as follows:
————————Master Budget——-Actual———-Variance
Sales——————–$420,000——$252,000——–$(168,000)
Variable costs———-315,000——–201,600———–113,400
Contribution Margin –105,000———-50,400———–(54,600)
Fixed costs—————50,000———-55,000————-(5,000)
Operating income——$55,000——–$(4,600) ———$(59,600)
Units Sold—————120,000———–90,000
CM ratio———————–25%————-20%
Selling price—————$3.50————$2.80
If Mo' Joe elects to analyze its results using a flexible budget format, what is the flexible budget variance relative to operating income?
a. ($26,250)
b. ($33,350)
c. ($28,350)
d. $28,750
Here is what I did, I always get the signs mixed up at the end and get the wrong answer:
SALES:
actual: 90*2.8 = 252
budgeted: 120*3.5 = 420
flex budget: 90*3.5 = 315
flex var: 252-315= -63
VC:
actual: 201.6
flex budget: 315*(1-.25)= 236.25
flex var: 236.25-201.6= 34.65
FC:
actual: 55
flex budget: 50
flex var: -5
Flexible Budget Variance:
Sales -63
-VC +34.65 (why am I not subtracting this???)
-FC -5
=
OI -33.35
FAR- 80
BEC- 75
AUD- 78
REG- ?
.