Required information
[The following information applies to the questionsdisplayed below.]
Adger Corporation is a service company that measures its outputbased on the number of customers served. The company provided thefollowing fixed and variable cost estimates that it uses forbudgeting purposes and the actual results for May as shownbelow:
Fixed Element
per Month Variable Element per Customer Served Actual Total
for May Revenue $ 5,200 $ 170,000 Employee salaries and wages $ 51,000 $ 1,200 $ 92,700 Travel expenses $ 650 $ 20,600 Other expenses $ 30,000 $ 29,000
When preparing its planning budget the company estimated that itwould serve 30 customers per month; however, during May the companyactually served 35 customers.
Required:
1. What amount of revenue would be included in Adgerâs flexiblebudget for May?
2. What amount of employee salaries and wages would be includedin Adgerâs flexible budget for May?
3. What amount of travel expenses would be included in Adgerâsflexible budget for May?
4. What amount of other expenses would be included in Adgerâsflexible budget for May?
5. What net operating income would appear in Adgerâs flexiblebudget for May?
6. What is Adgerâs revenue variance for May? (Indicatethe effect of each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)
7. What is Adgerâs employee salaries and wages spending variancefor May? (Indicate the effect of each variance by selecting"F" for favorable, "U" for unfavorable, and "None" for no effect(i.e., zero variance). Input all amounts as positivevalues.)
8. What is Adgerâs travel expenses spending variance for May?(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
9. What is Adgerâs other expenses spending variance for May?(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
10. What amount of revenue would be included in Adgerâs planningbudget for May?
11. What amount of employee salaries and wages would be includedin Adgerâs planning budget for May?
12. What amount of travel expenses would be included in Adgerâsplanning budget for May?
13. What amount of other expenses would be included in Adgerâsplanning budget for May?
14. What activity variance would Adger report in May withrespect to its revenue? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)
15. What activity variances would Adger report with respect toeach of its expenses for May? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)
Required information
[The following information applies to the questionsdisplayed below.]
Adger Corporation is a service company that measures its outputbased on the number of customers served. The company provided thefollowing fixed and variable cost estimates that it uses forbudgeting purposes and the actual results for May as shownbelow:
| Fixed Element per Month | Variable Element per Customer Served | Actual Total for May | |||||
| Revenue | $ | 5,200 | $ | 170,000 | |||
| Employee salaries and wages | $ | 51,000 | $ | 1,200 | $ | 92,700 | |
| Travel expenses | $ | 650 | $ | 20,600 | |||
| Other expenses | $ | 30,000 | $ | 29,000 | |||
When preparing its planning budget the company estimated that itwould serve 30 customers per month; however, during May the companyactually served 35 customers.
Required:
1. What amount of revenue would be included in Adgerâs flexiblebudget for May?
2. What amount of employee salaries and wages would be includedin Adgerâs flexible budget for May?
3. What amount of travel expenses would be included in Adgerâsflexible budget for May?
4. What amount of other expenses would be included in Adgerâsflexible budget for May?
5. What net operating income would appear in Adgerâs flexiblebudget for May?
6. What is Adgerâs revenue variance for May? (Indicatethe effect of each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)
7. What is Adgerâs employee salaries and wages spending variancefor May? (Indicate the effect of each variance by selecting"F" for favorable, "U" for unfavorable, and "None" for no effect(i.e., zero variance). Input all amounts as positivevalues.)
8. What is Adgerâs travel expenses spending variance for May?(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
9. What is Adgerâs other expenses spending variance for May?(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
10. What amount of revenue would be included in Adgerâs planningbudget for May?
11. What amount of employee salaries and wages would be includedin Adgerâs planning budget for May?
12. What amount of travel expenses would be included in Adgerâsplanning budget for May?
13. What amount of other expenses would be included in Adgerâsplanning budget for May?
14. What activity variance would Adger report in May withrespect to its revenue? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)
15. What activity variances would Adger report with respect toeach of its expenses for May? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)
Related questions
Required information
[The following information applies to the questionsdisplayed below.]
Adger Corporation is a service company that measures its outputbased on the number of customers served. The company provided thefollowing fixed and variable cost estimates that it uses forbudgeting purposes and the actual results for May as shownbelow:
| Fixed Element per Month | Variable Element per Customer Served | Actual Total for May | |||||
| Revenue | $ | 5,200 | $ | 170,000 | |||
| Employee salaries and wages | $ | 51,000 | $ | 1,200 | $ | 92,700 | |
| Travel expenses | $ | 650 | $ | 20,600 | |||
| Other expenses | $ | 30,000 | $ | 29,000 | |||
When preparing its planning budget the company estimated that itwould serve 30 customers per month; however, during May the companyactually served 35 customers.
11. What amount of employee salaries and wages would be includedin Adgerâs planning budget for May?
12. What amount of travel expenses would be included in Adgerâsplanning budget for May?
13. What amount of other expenses would be included in Adgerâsplanning budget for May?
14. What activity variance would Adger report in May withrespect to its revenue? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)
15. What activity variances would Adger report with respect toeach of its expenses for May? (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
| Fixed Element per Month | Variable Element per Customer Served | Actual Total for May | |||||
| Revenue | $ | 5,400 | $ | 203,000 | |||
| Employee salaries and wages | $ | 53,000 | $ | 1,400 | $ | 108,500 | |
| Travel expenses | $ | 750 | $ | 27,700 | |||
| Other expenses | $ | 32,000 | $ | 30,800 | |||
When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.
1. What amount of revenue would be included in Adgerâs flexible budget for May?
- Amount of revenue included in flexible budget:
2.What amount of employee salaries and wages would be included in Adgerâs flexible budget for May?
3.What amount of travel expenses would be included in Adgerâs flexible budget for May?
4. What amount of other expenses would be included in Adgerâs flexible budget for May?
5. What net operating income would appear in Adgerâs flexible budget for May?
6. What is Adgerâs revenue variance for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
7. What is Adgerâs employee salaries and wages spending variance for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
8. What is Adgerâs travel expenses spending variance for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
9. What is Adgerâs other expenses spending variance for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
10. What is Adgerâs other expenses spending variance for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
11. What amount of employee salaries and wages would be included in Adgerâs planning budget for May?
12. What amount of travel expenses would be included in Adgerâs planning budget for May?
13. What amount of other expenses would be included in Adgerâs planning budget for May?
14. What activity variance would Adger report in May with respect to its revenue? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
15. What activity variances would Adger report with respect to each of its expenses for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
You are a Consultant for the professional service firm, BUSI2083 LLP. Your firm specializes in providing a wide variety ofinternal business solutions for different clients. One of thepartners in your practice is impressed with the work you havecompleted to date and would like to give you additionalresponsibility. She has asked you to take the lead on thisengagement with the hope that a successful outcome may lead to yourpromotion to Senior Consultant. You take the background files fromthe partner and get started.
Perfect Stitch Replicaâs Limited, a nationwide distributor oflow-cost imitation clothing, has an exclusive agreement for thedistribution of the clothing. Sales have grown so rapidly over thelast few years that it has become necessary to add new members tothe management team. To date, the company's budgeting practiceshave been minimal, and at times, the company has experienced a cashshortage. You have been given responsibility for all planning andbudgeting. Your first assignment is to prepare a master budget forthe next three months, starting April 1. You are anxious to make afavourable impression and have assembled the information below.
Additional Information
The clothing is sold to retailers for an average price of $10each. Recent and forecasted sales in units are as follows:
Recent and forecast sales: | |
January (actual) | 20,000 |
February (actual) | 26,000 |
March (actual) | 40,000 |
April | 65,000 |
May | 100,000 |
June | 50,000 |
July | 30,000 |
August | 28,000 |
September | 25,000 |
Ending inventories should be equal to 40% of the next month'ssales in units.
The average cost of the clothing is $4 each. Purchases are paidfor as follows: 50% in the month of purchase and the remaining 50%in the following month. All sales are on credit, with no discount,and payable within 15 days. The company has found, however, thatonly 20% of a month's sales are collected by month-end. Anadditional 70% is collected in the following month, and theremaining 10% is collected in the second month following sale. Baddebts have been negligible.
The company's monthly operating expenses are given below:
Variable: | |
Sales commissions (percentage of sales) | 4% |
Fixed: | |
Advertising | $200,000 |
Rent | $18,000 |
Wages and salaries | $106,000 |
Utilities | $7,000 |
Insurance | $3,000 |
Depreciation | $14,000 |
All operating expenses are paid during the month, in cash, withthe exception of depreciation and insurance. Insurance is paid onan annual basis, in November of each year. The company plans topurchase $16,000 in new equipment during May and $40,000 in newequipment during June; both purchases will be paid in cash. Thecompany declares dividends of $15,000 each quarter, payable in thefirst month of the following quarter. The company's balance sheetat March 31 is given below:
Balance Sheet at March 31: | |
Assets | |
Cash | $ 74,000 |
Accounts receivable* | 346,000 |
Inventory** | 104,000 |
Prepaid insurance | 21,000 |
Fixed assets, net of depreciation | 950,000 |
Total assets | $1,495,000 |
Liabilities and Shareholders' Equity | |
Accounts payable | $ 100,000 |
Dividends payable | 15,000 |
Common shares | 800,000 |
Retained earnings | 580,000 |
Total liabilities and shareholders' equity | $ 1,495,000 |
Notes to Balance Sheet: | |
*February sales | $ 26,000 |
March sales | 320,000 |
$ 346,000 | |
**Number of units: | |
Dollar amount of inventory | 104,000 |
Divide by cost per unit | $ 4 |
Number of units | 26,000 |
The company wants a minimum ending cash balance each month of$50,000. All borrowing is done at the beginning of the month; anyrepayments are made at the end of the month. The company has anagreement with a bank that allows it to borrow in increments of$1,000 at the beginning of each month. The interest rate on theseloans is 1% per month, and for simplicity, assume that interest isnot compounded. At the end of the quarter, the company would paythe bank all of the accumulated interest on the loan and as much ofthe loan as possible (in increments of $1,000), while stillretaining at least $50,000 in cash.
Prepare the following budgets for the first three months of2016:
A sales budget by month and in total
A schedule of expected cash collections from sales, by month andin total.
A merchandise purchases budget in units and in dollars. Show thebudget by month and in total.
A schedule of expected cash disbursements for merchandisepurchases, by month and in total.
A cash budget. Show the budget by month and in total.
A budgeted Income Statement for the three-month period endingJune 30. Use the variable costing approach.
Provide a budgeted Balance Sheet as at June 30th.
