Beech Company produced and sold 105,000 units of its product in May. For the level of production achieved in May, the budgeted amounts were: sales. $1,300,000; variable costs. $750,000: and fixed costs. $300,000. The following actual financial results are available for May.

Actual
Sales (105,000 units) $1,275,000
Variable costs 712,500
Fixed costs 300,000
*Prepare a flexible budget performance report for May.

BEECH COMPANY
Flexible Budget Performance Report
For the Month Ended May 31
Flexible Budget Actual Results Variance Favorable/Unfavorable
Contribution margin

Contribution margin       12,500  Fav

Explanation:

Beech Company

Flexible Budget Performance Report

For the Month Ended May 31

                       Flexible Budget         Actual Results              Variance

Sales                  $1,300,000;                  $1,275,000             25,000  Unfav

Variable costs      $750,000:                     712,500               37,500    Fav  

Fixed costs.          $300,000                     300,000              -                    

Contribution margin  250,000                262,500            12,500  Fav

We calculate the Variance by subtracting the actual and the flexible budget amounts. Because actual sales are less the variance is unfavorable and actual costs are also less the variance is favorable.