ACTG 2020 Chapter Notes - Chapter 11: Statistical Process Control, Inverse Relation, Unnecessary Health Care

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2 May 2017

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Flexible budget: static budget budget designed for only planned level of activity. Adequate for planning purposes, not controlling (reality can significantly vary from projections: flexible budget provides/estimates of what revenues/costs should be for any level of activity within specified range. Actual revenues and costs compared to what revenues/costs should have been for the same level according to planning. Budget is adjusted to show what revenues and costs should be for specific level of activity. Variable costs multiplied by different levels of sales to reflect variability in total revenues/costs. Fixed costs do not change under relevant range of activity. 3 components actual revenues/expenses for year, flexible budget based on actual sales, and flexible budget variance: flexible budget variance difference between actual and flexible budget amounts for revenues/expenses. Can be favourable (f) or unfavourable (u) Deviations from price standards and quantity standards separated: variances differences between standard and actual prices, and standard and actual quantities.

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

magentabat295

Several years ago, Westmont Corporation developed acomprehensive budgeting system for planning and control purposes.While departmental supervisors have been happy with the system, thefactory manager has expressed considerable dissatisfaction with theinformation being generated by the system.

A typical departmental cost report for a recent periodfollows:

Assembly Department Cost Report For the Month Ended March 31
	Actual Results		Planning Budget		Variances
Machine-hours		50,000		55,000
Variable costs:
Supplies	$	48,950	$	52,250	$	3,300	F
Scrap		32,400		33,000		600	F
Indirect materials		82,800		88,000		5,200	F
Fixed costs:
Wages and salaries		89,250		90,000		750	F
Equipment depreciation		70,000		70,000		â
Total cost	$	323,400	$	333,250	$	9,850	F

After receiving a copy of this cost report, the supervisor ofthe Assembly Department stated, âThese reports are super. It makesme feel really good to see how well things are going in mydepartment. I canât understand why those people upstairs complainso much about the reports.â

For the last several years, the companyâs marketing departmenthas chronically failed to meet the sales goals expressed in thecompanyâs monthly budgets.

Required:

1. The companyâs president is uneasy about the cost reports,what can be the reason? (You may select more than oneanswer. Single click the box with the question mark to produce acheck mark for a correct answer and double click the box with thequestion mark to empty the box for a wrong answer.)

	Cost reports are ineffective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
	Cost reports show whether fixedcosts are controlled and do not show whether variable costs arecontrolled.
	Cost reports are effective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
	Cost reports show whether fixedcosts and variable costs are controlled.

2. What kind of reports should be used to give better insightinto how well departmental supervisors are controlling costs?

	Flexible budget performance reportsmust be used
	Fixed budget performance reportsmust be used

3. Complete the new performance report for the quarter, based onFlexible Budget Performance approach. (Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)

4. Were costs well controlled in March?

chocolateworm132

P9-23 - Please explain how you arrived at your answers.Thank you!

Problem 9-23 Critiquing a Variance Report; Preparing aPerformance Report [LO1, LO4, LO6]

Several years ago, Shipley Corporation developed a comprehensivebudgeting system for profit planning and control purposes. Whiledepartmental supervisors have been happy with the system, thefactory manager has expressed considerable dissatisfaction with theinformation being generated by the system.

A typical departmental costreport for a recent period follows:

Assembly Department Cost Report For the Month Ended March 31
	Planning Budget		Actual Results		Variances
Machine-hours		32,000		27,000
Variable costs:
Supplies	$	9,600	$	9,000	$	600	F
Scrap		12,800		11,800		1,000	F
Indirect materials		54,400		48,900		5,500	F
Fixed costs:
Wages and salaries		50,000		51,900		1,900	U
Equipment depreciation		88,000		88,000		â

Total cost	$	214,800	$	209,600	$	5,200	F

After receiving a copy of this costreport, the supervisor of the Assembly Department stated, âThesereports are super. It makes me feel really good to see how wellthings are going in my department. I canât understand why thosepeople upstairs complain so much about the reports.â

For the last several years, thecompanyâs marketing department has chronically failed to meet thesales goals expressed in the companyâs monthly budgets.

Required:

The companyâs president is uneasy about the cost reports, whatcan be the reason? (You may select morethan one answer. Single click the box with the question mark toproduce a check mark for a correct answer and double click the boxwith the question mark to empty the box for a wronganswer.)

	Cost reports are effective asbudgeted costs at one level of activity is compared to actual costsat another level of activity
	Cost reports shows whether fixedcosts and variable costs are controlled
	Cost reports shows whether fixedcosts are controlled and do not show whether variable costs arecontrolled
	Cost reports are ineffective asbudgeted costs at one level of activity is compared to actual costsat another level of activity

What kind of reports should be used to give better insight intohow well departmental supervisors are controlling costs?

	Fixed budget performance reportsmust be used
	Flexible budget performance reportsmust be used

Complete a new performance report for the quarter, based onanswer to (2) above. (Input all amounts as positive values.Leave no cells blank - be certain to enter "0" wherever required.Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Round your intermediate calculations to 2 decimalplaces and final answers to the nearest dollar amount. Omit the "$"sign in your response.)

Assembly Department Performance Report For the Month Ended March 31
	Activity Variances		Budget	Revenue and Spending Variances
Machine-hours
Supplies	$	(Click to select)UFNone	$	$	(Click to select)UNoneF
Scrap		(Click to select)UFNone			(Click to select)UNoneF
Indirect materials		(Click to select)FUNone			(Click to select)NoneUF
Wages andsalaries		(Click to select)UFNone			(Click to select)FUNone
Equipmentdepreciation		(Click to select)UNoneF			(Click to select)FNoneU

Total	$	(Click to select)UNoneF	$	$	(Click to select)UFNone

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ACTG 2020 Chapter Notes - Chapter 11: Statistical Process Control, Inverse Relation, Unnecessary Health Care

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