ACG 2071 Lecture Notes - Lecture 17: Key Schedule, Cost Driver, Income Statement

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chocolateleopard236

4 Nov 2018

School

University of Florida

Department

Accounting

Course

ACG 2071

Professor

Schadewald

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Document Summary

Direct labor budget: quantity (hours) and cost of dl needed for production, formula for total dl cost. Units to be produced from production budget x dl hours per unit. = total dl hours required x dl cost per hour. As with dm and dl budgets, used for both planning and control: projected moh costs for period, distinguishes between fixed and variable costs, cost driver for variable costs units produced. Sg&a expenses budget: projected selling and administrative expenses for period, distinguishes between fixed and variable costs, cost driver for variable costs units sold. In large company, compilation of many smaller, departmental budgets: marketing, hr, r&d, shipping, etc. Budgeting income statement: importance: key schedule in budget process, end-product of 6 operating budgets, benefits, know in advance if plan results in acceptable profit, benchmark for evaluating overall company performance, lenders often require profit forecast. Capital expenditures budget: plans for making new capital investments.

Related Questions

ABC Company manufactures and sells one product. Sales andproduction information is contained below.Â· Selling price perunit $62 Â· Variablemanufacturing costs per unit produced (DM, DL, and variableMOH) $42Â· Variableoperating expenses per unit sold $9Â· Fixedmanufacturing overhead (MOH) in total for the year $112,000Â· Fixed operatingexpenses in total for the year $40,000Â· Units producedduring the year 14,000Â· Units sold duringthe year 15,000 (a) Prepare the income statement using variablecosting. (b) Prepare the income statement using absorption costing.(c) Please explain the difference in operating income between thetwo methods.

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Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

	1	2	3	4	Year
Sales in Units	40,000	30,000	50,000	55,000	175,000
Selling price per unit	X $1	X ?	X ?	X ?	X ?
Totals Sales	40,000	$ ?	X ?	X ?	X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Sales in Units	40,000	?	?	?	?
Plus desired units of ending finished goods inventory*	30,000	?	?	6000	6000
Desired total Units	43000	?	?	?	?
Less desired units of ending finished goods inventory*	4000	?	?	?	4000
Total Production units	39,000	?	?	?	?

*Desired units of ending finished goods inventory = 10% of nextquarterâs budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	32,000	50,500	55,500	?
Ounces per unit	X 20	X 20	X 20	X 20	X 20
Total production needs in ounces	780,000	?	?	?	?
Plus desired ounces of ending direct materials inventory*	128,000 908,000	? ?	? ?	240,000 ?	240,000 ?
Less desired ounces of ending direct materials inventory*	156,000	?	?	?	156,000
Total ounces of direct material to be purchased	752,000	?	?	?	?
Cost per ounce	X $0.01	X ?	X ?	X ?	X ?
Total cost of direct materials purchases	$7520	?	?	?	?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	?	?	?	?
Direct labor hours per units	X 0.001	X ?	X ?	X ?	X ?
Total direct labor hours	39.0	?	?	?	?
Direct labor cost per hour	X $8	X ?	X ?	X ?	X ?
Total direct labor cost	$312	$ ?	$ ?	$ ?	$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable overhead costs:
Factory supplies ($0.01)	$ 390	$ ?	$ ?	$ ?	$ ?
Employee benefits ($0.05)	1,950	?	?	?	?
Inspection ($0.01)	390	?	?	?	?
Maintenance and repairs($0.02)	780	?	?	?	?
Utilities ($0.01)	390	?	?	?	?
Total Variable overheadcosts	$3900	$ ?	$ ?	$ ?	$ ?
Total fixed overhead costs	1416	?	?	?	?
Total overhead costs	$5,316	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable Selling and Administrative expenses
Delivery expenses ($0.01)	$ 400	$ ?	$ ?	$ ?	$ ?
Sales Commission ($0.02)	800	?	?	?	?
Accounting ($0.01)	400	?	?	?	?
Other administrative expenses($0.01)	400	?	?	?	?
Total Variable selling and administrative exp.	$2,000	$ ?	$ ?	$?	$?
Total fixed selling and administrative exp.	5000	?	?	$?	?
Total selling and administrative expenses	$ 7,000	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the companyâs policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

lemonhamster976

Problem 1:

Peaceful Corporation manufactures figurines based on thefollowing information.

Standard costs	$20
Materials (4 ounces at $5)	$8
Direct labor (1 hour per unit)	$4
Variable overhead (based on direct labor hours)
Fixed overhead budget		$19,000
Actual results and costs
Materials purchased
Units	9,000
Cost	$39,600
Materials used in production
Finished product units	2,000
Raw material (ounces)	8,200
Direct labor hours	2,000
Direct labor cost	$20,000
Variable overhead costs	$5,980
Fixed overhead costs	$19,500

Required:

Prepare a performance report for Peaceful using the following headings.
2. Actual Production Costs
3. Flexible Budget Costs
4. Flexible Budget Variances
Compute the following variances (show calculations).
2. Materials usage variance
3. Labor rate variance
4. Labor efficiency variance
5. Variable overhead spending variance
6. Variable overhead efficiency variance
7. Fixed overhead budget variance
Give one possible explanation for each of the six variances computed in part b.

Problem 2:

The following is the current variable costing income statementfor Dolly Corporation.

Sales (5,000 units)		$100,000
Variable expenses Cost of goods sold	$35,000
Selling (10% of sales)	$10,000	$45,000
Contribution margin		$55,000
Fixed expenses
Manufacturing overhead	$24,000
Administrative	$12,500	$36,500
Operating income		$18,500

Below is the following information on operations for DollyCorporation.

Beginning inventory (units)	0
Units produced (units)	6,000
Manufacturing costs
Direct labor (per unit)	$5.00
Direct materials (per unit)	$2.30
Variable overhead (per unit)	$2.40

Required:
Prepare an absorption costing income statement.

Problem 3:

The following information was compiled for two models of cellphones.

	3G model	4G model	Average
Budgeted Contribution Margin	$80.00	$120.00	$95.25
Budgeted Sales in Units	28,000	18,000
Actual Sales in Units	28,600	16,500

Required:
Calculate the sales mix variance. (Show your calculations.)

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ACG 2071 Lecture Notes - Lecture 17: Key Schedule, Cost Driver, Income Statement

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