Biology Forums - Study Force

Chillcott Manufacturing produces ceiling fans. A master budget was prepared by the controller based on sales of 19,500 fans for the month of May. The budgeted income statement for the period follows:

Budgeted Income Statement

Revenue	​	$3,120,000
Variable expenses	​	​
Direct materials	$877,500	​
Direct labor	390,000	​
Variable overhead	585,000	​
Total variable expenses	​	1,852,500
Contribution margin	​	1,267,500
Fixed overhead	325,000	​
Fixed selling and administrative expenses	650,000	​
Total fixed expenses	​	975,000
Operating income	​	$   292,500

During May, Chillcott produced and sold 23,400 fans and had the following actual results:

Actual Income Statement

Revenue	​	$3,731,000
Variable expenses	​	​
Direct materials	$1,037,400	​
Direct labor	487,500	​
Variable overhead	715,000	​
Total variable expenses	​	2,239,900
Contribution margin	​	1,491,100
Fixed overhead	351,000	​
Fixed selling and administrative expenses	650,000	​
Total fixed expenses	​	1,001,000
Operating income	​	$   490,100

Required:

a.	Prepare a flexible budget for May.

b.	Calculate Chillcott's static budget variance for May.

c.	Will the static budget variance that you calculated in part (b) be useful to

management?
Why or why not?

d.	Based on the available information, prepare a performance report for management.

e.	Comment on the results of your report.

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