@hhung1485 This is my first time around the book. Super behind, but let me try. A flexible budget allows mgt to use actual sales with budgeted cost per unit, budgeted contribution margin, and fixed costs. the one that i have yet to understand is the flexible budget variance, but that's a different topic. Check my calculations below:
Actual: 12,000 units
Budgeted: 10,000 units
Actual sales: $132,000
Budgeted sales: $100,000
Budgeted cost per unit: $100,000/10,000 = $10/unit (use this $ for actual units sold)
Budgeted contribution margin: $40,000 (gross profit)/$100,000 (budgeted sales)= 40%
Fixed costs stay the same for flexible budgets
Actual Flexible Budgeted
12,000 units 12,000 units 10,000 units
Sales $132,000 $120,000 (12k units x $10 Budgeted sales price) $100,000
VC ($70,800) ($72,000) (60% of budgeted sales) ($60,000)
CM $61,200 $48,000 (40% of budgeted sales) $40,000
FC ($32,000) ($30,000) (Same as budgeted) ($30,000)
Ope. Inc. $29,200 $18,000 $10,000
IF someone has a better way to explain this, go right ahead. several explanations are better than one.
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