**White cells are adjustable**
Kristoffer Burnett, 2010
Small biz solutions at
www.imperoco.com
Flexible Budgeting Example
Budget Comparison
Actual Results
Price/Cost
Units
Total
Flexible Budget
Price/Cost
Units
Total
Static Budget
Price/Cost
Units
Total
Revenues
Item1
Item2
Item3
Item4
Item5
13,826
10,377
23,354
10,817
27,178
$171.00
282.00
178.00
263.00
$113.00
$2,364,246
2,926,314
4,157,012
2,844,871
3,071,114
$15,363,557
13,826
10,377
23,354
10,817
27,178
$155.00
267.00
157.00
261.00
$102.00
$2,143,030
2,770,659
3,666,578
2,823,237
2,772,156
$14,175,660
14,790
12,853
24,311
12,395
31,021
$155.00
267.00
157.00
261.00
$102.00
$2,292,450
3,431,751
3,816,827
3,235,095
3,164,142
$15,940,265
111,648
67,220
71,376
92,428
277,818
68,098
69,623
50,726
351,358
$2.19
6.54
6.83
8.47
5.08
1.31
7.34
4.95
1.68
111,648
67,220
71,376
92,428
277,818
68,098
69,623
50,726
351,358
$2.16
6.74
6.74
8.99
4.75
1.28
7.44
5.18
1.67
$2.16
6.74
6.74
8.99
4.75
1.28
7.44
5.18
1.67
13.70
7.95
13.74
242,261
236,588
85,552
13.88
7.37
13.05
$241,160
453,063
481,074
830,928
1,319,636
87,165
517,995
262,761
586,768
4,780,549
3,362,583
1,743,654
1,116,454
11,003,239
$3,172,421
124,245
74,547
77,232
102,976
293,787
72,632
75,166
57,350
371,298
242,261
236,588
85,552
$244,509
439,619
487,498
782,865
1,411,315
89,208
511,033
251,094
590,281
4,807,423
3,318,976
1,880,875
1,175,484
11,182,758
$4,180,799
239,957
234,104
95,565
13.88
7.37
$13.05
$268,369
502,447
520,544
925,754
1,395,488
92,969
559,235
297,073
620,068
5,181,947
3,330,603
1,725,346
1,247,123
11,485,020
$4,455,245
$1,130,722
1,586,379
2,717,101
$455,320
234,104
95,565
Total revenue
Variable Costs
Direct materials purchased
DM1
DM2
DM3
DM4
DM5
DM7
DM8
DM9
DM10
Total DM purchased
Direct labor expense
Variable overhead expense
Variable S&A expense
Total variable costs
Contribution margin
Direct labor units = hours. Actual DL hours will typically be greater than DL hours used in production because of breaks, downtime, etc.
Variable OH is assumed to be applied on the basis of DL hours
Variable S&A is assumed to be applied on a per unit produced basis
Equals "Total revenue" - "Total variable costs." It is the amount left to cover fixed costs
Fixed Costs
Fixed overhead expense
Fixed S&A expense
Total fixed costs
Operating income
$1,137,075
1,652,306
2,789,381
$1,391,418
4
Flexible Budget Variance
Variance Analysis
Revenues
Item1
Item2
Item3
Item4
Item5
Total revenue
Variable Costs
Direct materials purchased
DM1
DM2
5
Sales Volume Variance
$221,216
155,655
490,434
21,634
298,958
$1,187,897
$4.83
16.60
$1,130,722 Fixed OH is assumed to be applied on the basis of DL hours
1,586,379 Fixed S&A is assumed to be applied on a per unit produced basis
2,717,101
$1,738,144 Equals "Contribution margin" - "Total fixed costs"
6
Actual Budget Variance
Positive numbers are greater than expected, negative numbers, less than expected
$(149,420)
(661,092)
(150,249)
(411,858)
(391,986)
$(1,764,605)
$71,796
(505,437)
340,185
(390,224)
(93,028)
$(576,708) Negative variances are unfavorable, revenue was less than expected
$3,349
(13,444)
6,424
(48,063)
91,680
2,043
(6,962)
(11,667)
3,514
26,874
(43,607)
137,221
59,030
179,519
$1,008,378
$(27,210)
(49,384)
(39,469)
(94,827)
(75,853)
(5,804)
(41,240)
(34,312)
(33,300)
(401,398)
31,980
18,307
(130,670)
(481,781)
$(1,282,824)
$(23,860)
(62,828)
(33,046)
(142,889)
15,827
(3,761)
(48,202)
(45,979)
(29,786)
(374,524)
(11,627)
155,529
(71,639)
(302,262)
$(274,446)
6,353
65,927
72,280
$936,099
$(1,282,824)
6,353
65,927
72,280
$(346,726) Negative variances are favorable, costs were less than expected
DM3
DM4
DM5
DM7
DM8
DM9
DM10
Total DM purchased
Direct labor expense
Variable overhead applied
Variable S&A applied
Total variable costs
Contribution margin
Fixed Costs
Fixed overhead expense
Fixed S&A expense
Total fixed costs
Operating income
Notes:
1 For simplicities sake, a weighted-average cost per unit is used for actual results.
2 Since overhead is applied and not actually paid as an hourly rate, the "actual rate" must be calculated by dividing the actual amount spent on overhead by
actual direct labor hours used in production.
3 The flex budget takes the actual units * static budget price/cost.
