ACC 202 Chapter Notes - Chapter 9: European Cooperation In Science And Technology, Cost Driver

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tanhyena210

17 Aug 2020

School

Ball State University

Department

Accounting

Course

ACC 202

Professor

Moudy

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F=favorable variance that occurs when actual revenue is greater than budgeted revenue and when actual costs are less than budgeted costs. U=unfavorable variance that occurs when actual costs are greater than budgeted costs. Prepare performance report > analyze variances > raise questions > identify root causes > take actions > conduct next period"s operations *repeat. Planning budgets are prepared for single, planned level of activity. When comparing actual results with the planning budget. Whether unfavorable/favorable variances has done a poor/good job controlling costs cannot be answered because the actual level of activity is greater than the planned activity. Therefore, actual variable costs are likely to be higher than planned variable costs regardless of managerial efficiency. How much of the cost variances are due to higher activity and how much are due to cost control? . To answer this question, we need to flex the planning budget to accommodate the actual level of activity.

Related Questions

I need some feedback if these are correct.
1.
A flexible budget is a budget that:
A) is updated with actual costs as they occur during theperiod.
B) is updated to reflect the actual level of activity during theperiod.
C) is prepared using a computer spreadsheet application.
D) contains only variable production costs.
2.
Ofarrell Snow Removal's cost formula for its vehicle operating costis $1,840 per month plus $377 per snow-day. For the month ofNovember, the company planned for activity of 14 snow-days, but theactual level of activity was 19 snow-days. The actual vehicleoperating cost for the month was $9,280. The vehicle operating costin the flexible budget for November would be closest to:
A) $9,003
B) $7,118
C) $9,280
D) $9,660
3.
Entler Framing's cost formula for its supplies cost is $2,250 permonth plus $16 per frame. For the month of June, the companyplanned for activity of 502 frames, but the actual level ofactivity was 497 frames. The actual supplies cost for the month was$10,580. The supplies cost in the planning budget for June would beclosest to:
A) $10,580
B) $10,282
C) $10,686
D) $10,202
4.
Johannsen Catering uses two measures of activity, jobs and meals,in the cost formulas in its budgets and performance reports. Thecost formula for catering supplies is $310 per month plus $103 perjob plus $23 per meal. A typical job involves serving a number ofmeals to guests at a corporate function or at a host's home. Thecompany expected its activity in February to be 28 jobs and 187meals, but the actual activity was 26 jobs and 192 meals. Theactual cost for catering supplies in February was $7,620. Thecatering supplies in the flexible budget for February would beclosest to:
A) $7,495
B) $7,404
C) $7,620
D) $6,960
5.
Kimbril Catering uses two measures of activity, jobs and meals, inthe cost formulas in its budgets and performance reports. The costformula for catering supplies is $530 per month plus $91 per jobplus $12 per meal. A typical job involves serving a number of mealsto guests at a corporate function or at a host's home. The companyexpected its activity in January to be 27 jobs and 174 meals, butthe actual activity was 31 jobs and 173 meals. The actual cost forcatering supplies in January was $5,330. The activity variance forcatering supplies in January would be closest to:
A) $255 F
B) $255 U
C) $352 F
D) $352 U
6.
Lapinsky Air uses two measures of activity, flights and passengers,in the cost formulas in its budgets and performance reports. Thecost formula for plane operating costs is $31,400 per month plus$2,148 per flight plus $7 per passenger. The company expected itsactivity in April to be 89 flights and 261 passengers, but theactual activity was 84 flights and 260 passengers. The actual costfor plane operating costs in April was $204,810. The spendingvariance for plane operating costs in April would be closestto:
A) $8,842 U
B) $19,589 F
C) $19,589 U
D) $8,842 F
7.
Velten Corporation's flexible budget performance report for lastmonth shows that actual indirect materials cost, a variable cost,was $45,198 and that the spending variance for indirect materialscost was $9,114 favorable. During that month, the company worked18,600 machine-hours. Budgeted activity for the month had been19,000 machine-hours. The cost formula per machine-hour forindirect materials cost must have been closest to:
A) $1.90
B) $2.86
C) $1.94
D) $2.92
8.
Which of the following comparisons best isolates the impact thatchanges in prices of inputs and outputs have on performance?
A) static planning budget and flexible budget
B) static planning budget and actual results
C) flexible budget and actual results
D) master budget and static planning budget
9.
The excess or deficiency of cash available over disbursements onthe cash budget is calculated as follows:
A) The beginning balance less the expected cash receipts less theexpected cash disbursements.
B) The cash available less the expected cash receipts plus theexpected cash disbursements.
C) The beginning balance plus the expected cash receipts less theexpected cash disbursements.
D) None of the above.
10.
There are various budgets within the master budget. One of thesebudgets is the production budget. Which of the following BESTdescribes the production budget?
A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desiredending inventory.
D) It summarizes the costs of producing units for the budgetperiod.
1.B
2.A
3.A
4.C
5.D
6.C
7.A
8.B
9.A
10.C

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Stevens Center is a nonprofit organization devoted its stagingplays for children. The theater has a very small
full-time professional administrative staff. Through a specialarrangement with the actors' union, actors
and directors rehearse without pay and are paid only for actualperformances.

The costs from the current year's planning budget appear below.Steven Center had tentatively planned to put
on six different productions with a total of 108 performances.For example, one of the productions was The Lion King,
which has a six-week run with three performances on eachweekend.

Stevens Center
Costs from the Planning Budget
For the Year Ended December 31
Budgeted number of productions	6
Budgeted number of performances	108
Actors' and directors' wages	$215,000
Stagehands' wages	31,900
Ticket booth personnel and ushers' wages	16,400
Scenery, costumes, and props	107,900
Theater hall rent	53,000
Printed programs	26,800
Publicity	12,200
Administrative expense	44,200
Total	$507,400

Some of the costs vary with the number of productions, some withthe number of performances, and
some are fixed and depend on neither the number of productionsnor the number of performances.
The costs of scenery, costumes, props, and publicity vary withthe number of productions.
It doesn't make any differences how many times The Lion King isperformed, the cost of the
scenery is the same. Likewise, the cost of publicizing a playwith posters and radio commericals is the
same whether there are 10,20 or 30 performances of the play. Onthe other hand, the wages of
the actors, directors, stagehands, ticket booth personnel, andushers vary with the number of
perofrmances. The greater the number of performances, the higherthe wage costs will be. Similarily,
the costs of renting the hall and printing the programs willvary with the number of performances.
Administrative expenses are more difficult to pin down, but thebest estimate is that approximately
75% of the budgeted costs are fixed, 15% depend on the number ofproductions staged, and the
remaining 10% depend on the number of performances.

After the beginning of the year, the board of directors of thetheater authorized expanding the
theater's program to seven productions and a total of 168performances. Not surprisingly, actual
costs were considerably higher than the costs from the planningbudget. (Grants from donors
and ticket sales were also correspondingly higher, but are notshown here.) Data concerning the
actual costs appear below:

Stevens Center
Costs from the Planning Budget
For the Year Ended December 31
Actual number of productions	7
Actual number of performances	168
Actors' and directors' wages	$341,600
Stagehands' wages	49,500.00
Ticket booth personnel and ushers' wages	25,800.00
Scenery, costumes, and props	130,700.00
Theater hall rent	78,100.00
Printed programs	38,400.00
Publicity	15,200.00
Administrative expense	47,100.00
Total	$726,400

1. Prepare a flexible budget for the Stevens Center based on theactual activity of the year.


























2. Prepare a flexible budget performance report for the yearthat shows both spending variance
and activity variances.
Stevens Theater
Flexible Budget Performance Report
For the Year Ended December 31
	Actual Results	Spending Variances	Flexible Budget	Activity Variances	Planning Budget

Actual number of productions	7
Actual number of performances	168
Actors' and directors' wages	$341,600
Stagehands' wages	49,500.00
Ticket booth personnel and ushers' wages	25,800.00
Scenery, costumes, and props	130,700.00
Theater hall rent	78,100.00
Printed programs	38,400.00
Publicity	15,200.00
Administrative expense	47,100.00
Total	$726,400













3. If you were on the board of directors of the theater, wouldyou be pleased with how
costs were controlled during the year? Why or why not?















4. The cost formula provide figures for the average cost perproduction and average cost per performance.
How accurate do you think these figures would be for predictingthe cost of a new production or of an additiional performance of aparticular production?

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1. T or F: Standardsare set for units; budgets are expressed in total dollars.

2. T or F: The standard cost per unit iscomputed by multiplying the standard quantity or hours by the

standard price or rate.

3. T or F: When actual revenue is above budgetor actual cost is below budget, a favorable variance

occurs.

4. T or F: Anunfavorable cost variance occurs when actual cost is higher thanbudget cost.

5. T or F With a flexible budget a manager can determine whatcosts should have been attained at a

given level of activity.

6. T or F : In a standard costing system wherethe denominator activity for the predetermined

overhead rate is labor-hours, overhead costs are applied to work inprocess on the basis of

actual hours worked.

7. T or F: A volumevariance and an efficiency variance are computed for fixed overheadcosts.

8. T or F: The budgetvariance represents the difference between the actual fixedoverhead cost

incurred during a period and the budgeted fixedoverhead cost.

9. T or F: Under theabsorption costing method, a company can increase profits byincreasing

production rather than by increasing sales.

10. T or F: Profitsmove in the same direction as sales when variable costing is usedif selling prices,

thesales mix, and the cost structure remain the same.

11. T or F: Thesalary of the CEO of Wal-Mart is a traceable fixed cost of thevarious WM stores.

12. T or F: Indirectcost is not traced directly to specific cost objects (products,jobs, or customers).

13. T or F: A costthat has already been incurred and therefore cannot be changed byany alternatives

issunk cost.

14. T or F:Generally, a product line should be dropped when the fixed coststhat can be avoided by dropping the product line are less than thecontribution margin that will be lost.

15. When the amount assigned to aresponsibility center is significantly influenced by the actions ofsomeone within the responsibility center, the item of cost is a_____________________.

16. In a _____________ cost system,every unit of product moving along the production line bears thesame amount of overhead cost, regardless of how much time itactually takes to process a particular unit.

17. In _______________ costing, nofixed overhead costs are charged to individual units of product, sono overhead rate for the fixed component of overhead costs need beused in the cost accounting system.

18. A cost that is incurred to supporta number of costing objects but cannot be traced to themindividually is a ___________________.

19. _______________is often regardedas the best approach to the transfer pricing problem, particularlyif transfer price negotiations routinely become bogged down.

20. A _______________ is simply thedifference between a predetermined norm or standard and the____________ results. Management wants to know not only what theamounts of the differences were but also, and more important, whythese occurred to take corrective action.

21. A _______________ center is anybusiness segment whose manger has control over both cost andrevenue. However, it generally does not have control overinvestment funds.

* Words banks for theabove Q15 through Q21: Absorbed, Actual, Budgeted, Common cost,Controllable cost, Cost, Full, Market price, Negotiated transferprice, Profit, Standards, Transfer price, Variable, &Variance.

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ACC 202 Chapter Notes - Chapter 9: European Cooperation In Science And Technology, Cost Driver

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