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ACC 406 Lecture Notes - Lecture 9: Stabilisation Force In Bosnia And Herzegovina

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carminezebra136
25 Apr 2017
School
Ryerson University
Department
Accounting
Course
ACC 406
Professor
Nicholas Bordignon

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Document Summary

Performance reports: compare actual costs with budgeted costs for the budgeted level of activity. Two ways: static budget compare actual costs with budgeted costs for the budgeted level of activity not changing, flexible budget compare actual costs with the actual level of activity. Unfavourable variances result when actual production exceeds the planned level. Having a budget for different activity levels flexible budget. Budget for one particular level of activity. Direct materials, direct labour, and overhead costs budgeted for the planned level of activity with actual costs for the actual level of activity. Actual costs and expected costs must be compared at the same level of activity. F favourable because selling more is good for the company. Unfavourably high, but we don"t have enough data to know why. The starting point for every budgeting exercise, the static budget, should be prepared before the accounting period begins.

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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

Static Budget vs. Flexible Budget

The production supervisor of the Machining Department forRodriguez Company agreed to the following monthly static budget forthe upcoming year:

Rodriguez Company

Machining Department Monthly Production Budget

Wages $384,000

Utilities 36,000

Depreciation 60,000

Total $480,000

The actual amount spent and the actual units produced in thefirst three months of 2016 in the Machining Department were asfollows:

Amount Spent Units Produced

January $400,000 90,000

February 440,000 100,000

March 470,000 110,000

The Machining Department supervisor has been very pleased withthis performance because actual expenditures for January–March havebeen less than the monthly static budget of $480,000. However, theplant manager believes that the budget should not remain fixed forevery month but should “flex” or adjust to the volume of work thatis produced in the Machining Department. Additional budgetinformation for the Machining Department is as follows:

Wages per hour $16.00

Utility cost per direct labor hour $1.50

Direct labor hours per unit 0.20

Planned monthly unit production 120,000

Static Budget vs. Flexible Budget

The production supervisor of the Machining Department forRodriguez Company agreed to the following monthly static budget forthe upcoming year:

Rodriguez Company
Machining Department
Monthly Production Budget
Wages $384,000
Utilities 36,000
Depreciation 60,000
Total $480,000

The actual amount spent and the actual units produced in thefirst three months of 2016 in the Machining Department were asfollows:

Amount Spent Units Produced
January $400,000 90,000
February 440,000 100,000
March 470,000 110,000

The Machining Department supervisor has been very pleased withthis performance because actual expenditures for January–March havebeen less than the monthly static budget of $480,000. However, theplant manager believes that the budget should not remain fixed forevery month but should “flex” or adjust to the volume of work thatis produced in the Machining Department. Additional budgetinformation for the Machining Department is as follows:

Wages per hour $16.00
Utility cost per direct labor hour $1.50
Direct labor hours per unit 0.20
Planned monthly unit production 120,000

X

Part A: Flexible Budget

a. Prepare a flexible budget for the actualunits produced for January, February, and March in the MachiningDepartment. Assume depreciation is a fixed cost. If required, useper unit amounts carried out to two decimal places. Enter allamounts as positive numbers.

Rodriguez Company-Machining Department
Flexible Production Budget
Forthe Three Months Ending March 31, 2016
January February March
Units of production 90,000 100,000 110,000
Wages $ $ $
Utilities
Depreciation
Total $ $ $
Supportingcalculations:
Units of production 90,000 100,000 110,000
Hours per unit x x x
Total hours ofproduction
Wages per hour x $ x $ x $
Total wages $ $ $
Total hours ofproduction
Utility costs perhour x $ x $ x $

Total utilities

Static Budget vs. Flexible Budget

The production supervisor of the Machining Departmentfor Rodriguez Company agreed to the following monthly static budgetfor the upcoming year:

Rodriguez Company
Machining Department
Monthly Production Budget
Wages $384,000
Utilities 36,000
Depreciation 60,000
Total $480,000

The actual amount spent and the actual units produced inthe first three months of 2016 in the Machining Department were asfollows:

Amount Spent Units Produced
January $400,000 90,000
February 440,000 100,000
March 470,000 110,000

The Machining Department supervisor has been verypleased with this performance because actual expenditures forJanuary–March have been less than the monthly static budget of$480,000. However, the plant manager believes that the budgetshould not remain fixed for every month but should “flex” or adjustto the volume of work that is produced in the Machining Department.Additional budget information for the Machining Department is asfollows:

Wages per hour $16.00
Utility cost per direct labor hour $1.50
Direct labor hours per unit 0.20
Planned monthly unit production 120,000

X

Part A: Flexible Budget

a. Prepare a flexible budget for the actual unitsproduced for January, February, and March in the MachiningDepartment. Assume depreciation is a fixed cost. If required, useper unit amounts carried out to two decimal places. Enter allamounts as positive numbers.

Rodriguez Company-Machining Department
Flexible Production Budget
Forthe Three Months Ending March 31, 2016
January February March
Units of production 90,000 100,000 110,000
Wages $ $ $
Utilities
Depreciation
Total $ $ $
Supportingcalculations:
Units of production 90,000 100,000 110,000
Hours per unit x x x
Total hours ofproduction
Wages per hour x $ x $ x $
Total wages $ $ $
Total hours ofproduction
Utility costs perhour x $ x $ x $
Total utilities $ $ $

X

Part B: Decision Analysis

b. Compare the flexible budget with the actualexpenditures for the first three months. Enter all amounts aspositive numbers.

January February March
Total flexible budget $ $ $
Actual cost
Excess of actual cost over budget $ $ $

What does this comparison suggest?

The Machining Department has performed better than originallythought.
The department is spending more than would be expected.

B&L Landscapes, Inc. Mini Practice Part5

WITH EQUETIONS PLEASE, WOULD LIKE TO UNDERSTANDIT

Bill Graham and Larry Miller incorporated B&L Landscapes,Inc. on July 1, 2014. The business consists of lawn care andsprinkler system installations. In addition, they also sell twotypes of fertilizer.

During 2015, B&L Landscapes, Inc. acquired a 30% interest inCrestline Pipe. The president of Crestline wants to develop amanagement report to evaluate Manufacturing Overhead costs. Billand Larry want to help and have volunteered your services toprovide some managerial reporting for Crestline.

Crestline Pipe distributes high-quality PVC pipe and has thefollowing information for the month of March, 2015

Crestline Pipe

Manufacturing Overhead Budget (Static)

For the Month of March, 2015

Budgeted production inLF 117,500

Budgeted costs

Indirect materials ($0.30/DLH) 7,050

Indirect labor($0.50/DLH) 11,750

Utilities($0.40/DLH) 9,400

Maintenance($0.25/DLH) 5,875

Salaries 42,000

Depreciation 16,800

Propertytaxes 2,500

Insurance 1,200

Janitorial 1,300

Total budgetedcosts $97,875

Crestline Pipe

Manufacturing Overhead Costs (Actual)

For the Month of March, 2015

Actual production inLF 118,500

Actual costs

Indirectmaterials) 7,100

Indirectlabor 11,825

Utilities 10,700

Maintenance 5,900

Salaries 42,000

Depreciation 16,800

Propertytaxes 2,500

Insurance 1,200

Janitorial 1,300

Total budgetedcosts $99,325

Crestline Pipe had the following static budget and overheadcosts for March. Manufacturing overhead is budgeted based on directlabor hours (DLH). Direct labor is budgeted at 12 minutes perlinear foot (LF).

Instructions:

Prepare a flexible manufacturing overhead budget based on thefollowing amounts produced.

115,500 LF

116,500 LF

117,500 LF

118,500 LF

119,500 LF

Prepare a flexible budget report showing the differences(favorable and unfavorable) in manufacturing overhead costs for themonth of March. Include your analysis of what variances should beinvestigated further.

Prepare a responsibility report for the manufacturing overheadfor March, assuming only variable costs are controllable. Provide abrief evaluation of how this information could be used to measurethe manufacturing manager’s performance.