c9-225-ex.doc - Exercise 9-1 Prepare a Flexible...

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Unformatted text preview: Exercise 9-1 Prepare a Flexible Budget [L09-1] Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 100 Revenue ($365.00q} $ 36,500 Expenses: Wages and salaries ($8,000 + $125.00q} 20,500 Supplies ($3.00q} 300 Equipment rental ($1,800 + $32.00q) 5,000 Insurance ($3,400) 3,400 Miscellaneous ($630 + $1 .80q) 810 Total expense 30,010 Net operating income $ 6,490 Required: During May, the company’s activityr was actually 105 diving-hours. Complete the following flexible budget for that level of activity. Revenue $ 38,325 Expenses: Wages and salaries 21,125 Supplies 315 Equipment rental 5,160 Insurance 3,400 Miscellaneous 819 Total expense 30,819 Net operating income $ 7,506 % Exercise 9-2 Prepare a Report Showing Activity Variances [L09—2] Flight Cafe is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below: Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) 13,000 Revenue ($4.50q) $ 81,000 Expenses: Raw materials ($2.40q) 43,200 Wages and salaries ($5,200 + $0.30q) 10,600 Utilities ($2,400 + $0.05q) 3,300 Facility rent ($4,300) 4,300 Insurance ($2,300) 2,300 Miscellaneous ($680 + $0.10q) 2,480 Total expense 66,180 Net operating income $ 14,820 3 In July, 1?,800 meals were actually served. The company’s flexible budget for this level of activity appears below: Flight Café Flexible Budget For the Month Ended July 31 Budgeted meals (q) 17,800 Revenue ($4.50q) $80,100 Expenses: Raw materials ($2.40q) 42,720 Wages and salaries ($5,200 + $0.30q) 10,540 Utilities ($2,400 + $0.05q) 3,290 Facility rent ($4,300) 4,300 Insurance ($2,300) 2,300 Miscellaneous ($680 + $0.10q) 2,460 Total expense 65,610 Net operating income $14,490 Required: 1. Compute the company’s activity variances for July. (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.) Revenue $ 900 U Expenses: Raw materials 480 F Wages and salaries 60 F Utilities 10 F Facility rent 0 None Insurance 0 None Miscellaneous 20 F Total expense 570 F Net operating income :5 330 U I Exercise 9-3 Prepare a Report Showing Revenue and Spending Variances [L09-3] Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 pounds of oysters in August. The company's flexible budget for August appears below: Quiloene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds (q) 8,000 Revenue ($4.00q) $32,000 Expenses: Packing supplies ($0.50q} 4,000 Oyster bed maintenance ($3,200) 3,200 Wages and salaries ($2,900 + $0.30q} 5,300 Shipping ($0.80q) 6,400 Utilities ($830) 830 Other ($450 + $0.05q) 850 Total expense 20,580 Net operating income $11,420 The actual results for August appear below: Quilcene Oysten'a Income Statement For the Month Ended August 31 Actual pounds 8,000 Revenue $35,200 Expenses: Packing supplies 4,200 Oyster bed maintenance 3,100 Wages and salaries 5,640 Shipping 6,950 Utilities 810 Other 930 Total expense 21 ,630 Net operating income $13,520 Required: lCompute the company’s revenue and spending variances for August. (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.) Revenue $ 3,200 F Expenses: Packing supplies 200 U Oyster bed maintenance 100 F Wages and salaries 340 U Shipping 550 U Utilities 20 F Other 130 U Total expense 1,100 U Net operating income $ 2,100 F I Exercise 9-4 Prepare a Flexible Budget Performance Report [L09-4] Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below: Vulcan Flyovers Operating Data For the Month Ended July 31 Actual Flexible Planning Resutts Budget Budget Flights (q) 48 48 50 Revenue ($320.00q) $13,650 $ 15,360 $ 16,000 Expenses: Wages and salaries ($4,000 + $82.00q} 8,430 7,936 8,100 Fuel ($23.00q) 1,260 1,104 1,150 Airport fees ($650 + $38.00q) 2,350 2,474 2,550 Aircraft depreciation ($?.00q) 336 336 350 Office expenses ($190 + $2.00q) 460 286 290 Total expense 12,836 12,136 12,440 Net operating income 35 814 $ 3,224 $ 3,560 The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount. Required: 1. Complete the flexible budget performance report abstract for July. (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.) Revenue $ 1,710 U $ 640 U Expenses: Wages and salaries 494 U 164 F Fuel 156 U 46 F Airport fees 124 F 76 F Aircraft depreciation 0 None 14 F Office expenses 174 U 4 F Total expense 700 U 304 F Net operating income $ 2,410 U $ 336 U I Exercise 9-5 Prepare a Flexible Budget with More Than One Cost Driver [L09—5] Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 80 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below: Fixed Cost Cost per Cost per per Month Cmise Passenger Vessel operating costs $ 5,200 $480.00 $ 2.00 Advertising 3; 1,700 Administrative costs $ 4,300 $ 24.00 $ 1.00 Insurance 33 2,900 For example, vessel operating costs should be $5,200 per month plus $480 per cruise plus $2 per passenger. The company’s sales should average $25 per passenger. The company’s planning budget for July is based on 24 cruises and 1,400 passengers. Required: Complete the company's planning budget for July. Revenue $ 35,000 Vessel operating costs 19,520 Advertising 1 ,700 Administrative oosts 6,276 2,900 Total expense 30,396 Net operating inoome 4,604 Foundational [L09-1, L09-2, Log-3] [ The foiiowing Information appiies to the questions dispiayed bellow] 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: Variable Element Fixed per Actual Element Customer Total per Month Served for May Revenue $ 5,000 $160,000 Employee salaries and wages $ 50.00035 1.100 $ 88,000 Travel expenses 5]; 600 $ 19,000 Other expenses $36,000 $ 34,500 When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers. Foundational 9-1 Required: 1. What amount of revenue would be included in Adger's flexible budget for May? Variable element per customer served 5, 000 Actual activity :— Amount In flexible budget —T5, 000 Foundational 9-2 2. What amount of employee salaries and wages would be included in Adger's flexible budget for May? Employee salaries and wages: Variable element per customer served $ 1,100 Actual activity 35 Variable portion of the amount $ 38,500 Fixed element per month 50,000 Amount in flexible budget $ 88,500 L} Foundational 9-3 3. What amount of travel expenses would be included in Adger’s flexible budget for May? Travel expenses: Variable element per customer served Actual activity Amount in flexible budget Foundational 9-4 4. What amount of other expenses would be included in Adger’s flexible budget for May? Foundational 9-5 5. What net operating income would appear in Adger's flexible budget for May? Foundational 9-6 6. What is Adger‘s 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.) $ 160,000 $ 15,000 U $ 175,000 Foundational 9-7 7. What is Adger‘s 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.) $ 88,000 $ 500 F $ 88,500 Foundational 9-8 8. What is Adger‘s 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.) $ 19,000 $ 2,000 F $ 21,000 Foundational 9-9 9. What is Adger’s 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.) $ 34,500 $ 1 ,500 F $ 36,000 Foundational 9-10 10.What amount of revenue would be included in Adger’s planning budget for May? Revenue: 5,000 30 1 50,000 Variable element per customer served Planned level of activity Amount in planning budget Foundaflonal941 11.What amount of employee salaries and wages would be included in Adger's planning budget for May? Employee salaries and wages: Variable element per customer served :5 1,100 Planned activity 30 Variable portion of the amount $ 33,000 Fixed element per month 50,000 Amount in planning budget $ 83,000 Foundaflonal942 12.What amount of travel expenses would be included in Adger’s planning budget for May? Travel expenses: Variable element per customer served :5 600 Planned activity 30 Amount in planning budget $ 18,000 Foundaflonal943 13.What amount of other expenses would be included in Adger’s planning budget for May? Foundaflonal944 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.) $ 175,000 $ 25,000 F $ 150,000 Foundaflonal945 15.What activity variances would Adger report with respect to each of its expenses? (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.) Employee salaries and wages $ 88,500 $ 5,500 U $ 83,000 Travel expenses :5 21,000 $ 3,000 U $ 18,000 Other expenses :5 36,000 $ 0 None $ 36,000 Problem 9-25 Critiquing 3 Cost Report; Preparing a Performance Report [L09-1, L09—4, L09-6] Frank Weston, supervisor of the Freemont Corporation's Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department's cost control report is given below: Freemont Corporation—Machining Department Cost Control Report For the Month Ended June 30 Actual Planning Resufts Budget Variances Machine-hours 38,000 35,000 Direct labor wages $ 86,100 $ 80,500 $ 5,600 U Supplies 23,100 21,000 2,100 U Maintenance 137,300 134,000 3,300 U Utilities 15,700 15,200 500 U Supervision 38,000 38,000 0 Depreciation 80,000 80,000 0 Total $ 380,200 $ 368,700 $ 11.500 U “I just can't understand all these unfavorable variances," Weston complained to the supervisor of another department. "When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before. Instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.” Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $92,000; the fixed component of the budgeted utilities cost is $11,700. Required: 2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (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.) Direct laborwages $ 86,100 $ 1.300 F $ 87,400 $ 6.900 U $ 80,500 Supplies 23,100 300 U 22,800 1,800 U 21,000 Maintenance 137,300 300 F 137,600 3,600 U 134,000 Utilities 15700 200 U 15,500 300 U 15,200 Supervision 38,000 0 None 38,000 0 None 38,000 Depreciation 80,000 0 None 80,000 0 None 80,000 Total $ 380,200 $ 1,100 F $ 381,300 $ 12,600 U l$ 368,700 ...
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