The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Results Flexible Budget Static Budget Sales volume (in units) 10,000 8,000 Sales revenues $239,000 $ $235,000 Variable costs 167,000 $ 184,000 Contribution margin $72,000 $ $51,000 Fixed costs 38,000 $ 33,000 Operating profit $34,000 $ $18,000 The flexibleminusbudget variance for variable costs is . (Round the final answer to the nearest dollar.)

Paralith Incorporated

Duck Decoy Department

Flexible Budget for Third Quarter:

                                Actual Results      Flexible Budget      Static Budget

Sales volume (in units) 10,000                  10,000                      8,000

Sales revenues      $239,000               $293,750                  $235,000

Variable costs            167,000               $ 230,000                  $184,000

Contribution margin $72,000                  $63,750                    $51,000

Fixed costs                  38,000                  $33,000                   $33,000

Operating profit      $34,000                  $30,750                     $18,000

Explanation:

a) Calculations for flexible budget:

Sales volume = 8,000/8,000 x 10,000 = 10,000 units

Sales revenue = $235,000/8,000 x 10,000 = $293,750

Variable costs = $184,000/8,000 x 10,000 = $230,000

Fixed Costs will remain at $33,000

b) A flexible budget is a budget that adjusts or flexes with changes according to the volume or activity level.  On the other hand, the static budget amounts do not change from the amounts established at the time that the static budget was prepared and approved.

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