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1 HELEEN Manufacturing Company prepares master budget
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
2
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
Expert Solution
1
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
2
|
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)
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