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1 HELEEN Manufacturing Company prepares master budget

Accounting

1 HELEEN Manufacturing Company prepares master budget. The Company had a static budgeted operating income of $9.6 million. Actual operating income was $6.4 million. The flexible budget operating income at the actual level of output is $7,000,000. What is the static-budget variance of operating income? Select one: a. $1.6 million Favorable b. $3.2 million Unfavorable c. $3.2 million Favorable d. $1.6 million Unfavorable

ABC Company prepares master budget for the next year. The Company has the following data: Month Budgeted Sales May $46,000 June 50,000 July 52,000 August 48,000 The cost of goods sold percentage is 65% of sales and the desired ending inventory level is 25% of next month's sales at cost. What are the expected total purchases for June? Select one: a. $32,500 b. $17,500 c. $40,950 d. $32,825

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The correct answer is b. 3.2 milion unfavorable

Explanation

Static Budget Variance

= static budget income - actual income

= 9.6 million - 6.4 million

= 3.2 million unfavorable

So the correct answer is

B. 3.2 millions unfavorable

MAY

JUNE JULY AUGUST
Budgeted Sales $46000 $50000 $52000 $48000
Cost of goods sold(65% of sales) $29900 $32500 $33800 $31200
Closing inventory $8125 $8450 $7800  

Note: Closing inventory is 25% of next month sales at cost.

Cost of goods sold=Opening inventory +Purchase-Closing inventory

Computation of purchase of june :

Cost of goods sold = $ 32500

Opening inventory =$ 8125

(Opening inventory of june is the closing inventory of may)

Closing inventory = $8450

Total Purchases = Cost of goods sold + Closing inventory- opening inventory

Total Purchases = $ 32500 + $ 8450 -$8125

$ 32825 (option d)