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Presentation/PPT
27/08/2022
Assume Marcella and the board adopted the spreadsheet prepared to forecast operations at 890,000 units (see the spreadsheet provided with this case) as the budget for 2016. At the close of the first six months of 2016, Marcella and the board asked the accountant to prepare an income statement for the first six months of 2016 to show how well the actual data compare to the budgeted data. The board asked to see a concise presentation showing only totals for variable and fixed costs. The analysis presented in Exhibit 2 below was provided for the board. Hanson expects sales and fixed costs to occur uniformly throughout the year.
Exhibit 2: Budget Analysis as of June 30, 2016
Budget Actual Variance
Sales units 445,000 470,000
Sales $ 1,824,500 $ 1,880,000 $55,500
Variable costs $694,200 $ 742,600 ($48,400)
Contribution margin $ 1,130,300 $ 1,137,400 $ 7,100
Fixed costs $ 1,054,400 $ 1,042,100 $ 12,300
Net income $ 75,900 $ 95,300 $19,400
3. (16 points) Using flexible budgeting for the information provided, provide an analysis of the actual operations for the six months ending June 30, 2016, in comparison to the expectations for this period. Identify all areas that either exceeded expectations or fell short of expectations. Your analysis should utilize the data provided.
4. (6 points) A board member, encouraged by the fact that actual income exceeded budgeted income by $19,400, wants to know if the board should feel satisfied that Hanson is advancing toward the goal of a target profit of $250,000. What is your response?
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