RTI Company’s master budget calls for production and sales of 18,000 units for $81,000; variable costs of $30,600; and fixed costs of $20,000. The company incurred $32,000 of variable costs to produce and sell 20,000 units for $85,000, and earned $25,000 operating income. Master budget sales volume (units) 18,000 Budgeted total sales revenue $81,000 Budgeted total variable costs $30,600 Budgeted fixed costs $20,000 Actual variable costs incurred $32,000 Actual production/sales volume (units) 20,000 Actual total sales revenue $85,000 Actual operating income $25,000 1. Determine RTI Company’s a. Flexible budget operating income. b. Contribution margin flexible-budget variance. c. Operating income flexible-budget variance. d. Sales volume variance, in terms of contribution margin. e. Sales volume variance, in terms of operating income. 2. Explain why the contribution margin sales volume variance and the operating income sales volume variance for the same period are likely to be identical. 3. Explain why the contribution margin flexible-budget variance is likely to differ from the operating income flexible-budget variance for the same period.
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