Butler Corp. prepared a budget last period that called for sales of 40,000 units at a price of $40 each. The costs per unit were estimated to amount to $28 variable and $10 fixed. During the period, production was exactly equal to actual sales of 45,000 units. The selling price was $38.00 per unit. Variable costs were $30 per unit. Fixed costs actually incurred were $375,000.
a) Prepare a report to show the difference between the actual contribution margin per the static budget and the budgeted contribution margin per the flexible budget.
b) Explain the significance of the comparisons.