Answer:
Follow the format of the flexible budget given in the problem, but use 8,100 cars for each calculation:
Flexible Budget
Answer:
1)A performance report is similar to a flexible budget variance report. Remake the planning budget, flexible budget, and actual results so they are side by side. Calculate the variances (differences between each column) and determine if they are favorable (F) or unfavorable (U). If Revenues are higher than planned, it is a favorable outcome. Likewise, if revenues are lower than planned it is an unfavorable out come. The opposite is true with regards to expenses:
Flexible Budget Performance Report
2)The overall activity variance due to an increase in activity is $374. On the other hand, the $1,740 unfavorable revenue variance is large relative to the company's net operating income and should therefore be investigated. The other variances are relatively small, but should probably be investigated if they are likely to occur in following periods.
Answer:
Actual results may differ from what had been budged at the beginning of a period, due to the following reasons:
• Activity Variance
• Revenue and spending variance
• Increase or decrease in revenues
• Increase or decrease in expenses