The document provides information on a shipping company's operating performance for the second quarter, including actual results compared to the master budget and a flexible budget. The actual sales volume was lower than the master budget but actual revenues and most expenses were also lower, resulting in an unfavorable total master budget variance but a favorable flexible budget variance. While contribution margin was lower than the master budget, fixed costs were mostly equal to budget resulting in an unfavorable variance in operating income compared to both budgets.

1. A B C
1
2 QUESTION II
3
4 Given, Constant Mix- 3 units of watch for every 1 unit of clock.
5 Watch Clock
6 Units 3 Units 1 Units
7 Selling Price $22.80 $38.80
8 Variable Cost $14.80 $26.80
9 Contribution Margin $8.00 $12.00
10
11
12 Current Mix 3 units + 1 unit = Composite unit
13 $8*3 + $12*1 = Composite unit
14 24 + 12 = 36 Composite unit
15
16
17 CALCULATION:
18 Given X is BEP unit for clock
19 3X is BEP For Watch
20 [($22.80*3X + $38.80*1X) - ($14.80*3X + $26.80*1X)] - $61200=0
21 [(68.40X + 38.8X) - (44.4X + 26.80X)] - $61200 = 0
22 [107.20X - 71.20X] - $61200 = 0
23 36X - $61200 = 0
24 X = $61200 / 36 units
25 X= 1700 units
26 Now X is BEP for Clock = 1700 units
27 3X is BEP for Watch = 3(1700)= 5100 units
28
29 ACTIVITY ANSWERS
30 Contribution Margin for Composite unit $36
31 BEP in Composite unit 1700 units
32 BEP for Clock 1700 units
33 BEP for Watch 5100 units

2. A B C D E F
1
2 QUESTION III
3
4 1 2
5 Actual Price Flexible Budget
6 Flexible Standard
7
8 (AQ * AP) AQ * SP (SQ * SP)
9
10
11 (8300 * 28) (8300 * 30) (2700 * 30 * 3)
12
13
14 $232,400 $249,000 $249,300
15 Price Variance Usage Variance
16
17 $2,49,000 * $2,32,400 $2,49,300 * $ 2,49,000
18
19 $16,600 $300
20
21 Favourable Favourable
22
23
24
25 (2) - (1)
26
27 $2,49,300 - $2,32,400
28
29 $16,900
30
31 Favourable
32
33
34
35 Given, ACTIVITY DIRECT MATERIAL
36
37 Standard price per unit of input $30
38 Actual price per unit of output $28
39 Standard inputs allowed per unit of output 3 pounds
40 Actual units of input 8300 pounds
41 Actual units of output 2770 units
42
43
44
45 REQUIREMENTS ANSWERS RESULT
46 1) The direct Material Price Variance $16,600 Favourable
47 2) The direct Material Usage Variance $300 Favourable
48 3) The direct Material Flxible Budget Variance $16,900 Favourable

3. QUESTION IV
Drake Shipping Company
Operating Performance Report
Second Quarter, 20X1
Prepared by JAY MODI
(1) (2) (3) (2)-(1) (2)-(3) (3)-(1)
Variable unit value Actual results at
used in Master Master actual sales activity Flexible Budget for actual Total Master Flexible Budget Sales Activity
Budget Budget (volume) sales activity (volume) Budget Variance Variance Variance
Units 800,000 760,000 760,000 (40,000) U 0 - (40,000) U
Net Revenue 10.00 $8,000,000 $7,600,000 $7,600,000 (400,000) U 0 - (400,000) U
Variable costs -
Fuel Expense 0.20 $160,000 $157,000 $152,000 (3,000) F 5,000 U (8,000) F
Repairs and maintenance 0.10 $80,000 $78,000 $76,000 (2,000) F 2,000 U (4,000) F
Supplies and Miscelaneous 1.00 $800,000 $788,000 $760,000 (12,000) F 28,000 U (40,000) F
Variable Payroll 6.70 $5,360,000 $5,200,000 $5,092,000 (160,000) F 108,000 U (268,000) F
Total Variable Costs 8.00 $6,400,000 $6,223,000 $6,080,000 (177,000) F 143,000 U (320,000) F
Contribution margin 2.00 $1,600,000 $1,377,000 $1,520,000 (223,000) U (143,000) U (80,000) U
Fixed costs
Supervision - $180,000 $183,000 $180,000 3,000 U 3,000 U - -
Rent - $160,000 $160,000 $160,000 - - - - - -
Depreciation - $480,000 $480,000 $480,000 - - - - - -
Other Fixed Costs - $160,000 $158,000 $160,000 (2,000) F (2,000) F - -
Total Fixed Costs - $980,000 $981,000 $980,000 1,000 U 1,000 U - -
Operating income - $620,000 $396,000 $540,000 (224,000) U (144,000) U (80,000) U
Decision Rule
Revenue:
Actual > Budget
Actual < Budget
Actual = Budget
Expense
Actual > Budget
Actual < Budget
Actual = Budget