LON-CAPA%20#7 Variance Analysis

LON-CAPA%20#7 Variance Analysis - Delivery Expense $115,000...

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In this problem, you must create a flexible budget for two specific cost items, and then compute the variances. The examples that will especially help you are in the second Master Budget lecture and Study Problem 8-27. In order to compute the variances, you must first find the parameters of the cost functions that are needed to compute the flexible budget. This information will also tell you what activity measure is used. Be careful to use the same one when you compute the flexible budget. Also be sure to read the directions about the sign that you should enter. ______________________________________________________ Four Flags is a retail department store. The following cost-volume relationships were used in developing the master budget for Four Flags for the current year: Cost Fixed Variable (per unit sold) Cost of Goods Sold $0 $6.20 Selling and Promotion Expense $215,000 $0.80 Building Occupancy Expense $185,000 $0.10 Buying Expense $155,000 $0.40
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Unformatted text preview: Delivery Expense $115,000 $0.05 Credit and Collection Expense $72,000 $0.03 Expected unit sales for the current year were 1,200,000, for total revenue of $12,000,000. Actual unit sales turned out to be 1,100,000, and total revenue was $11,000,000. At the end of the year, the actual costs for the company were as follows: Cost of Goods Sold $6,000,000 Selling and Promotion Expense $1,000,000 Building Occupancy Expense $310,000 Buying Expense $680,000 Delivery Expense $190,000 Credit and Collection Expense $35,000 Required Compute the flexible-budget variances for the following two cost items (enter favorable variances as positive numbers and unfavorable variances as negative numbers): Cost of Goods Sold ($6.20 x 1,100,000 + 0) - $6,000,000 = $6,820,000 - $6,000,000 = $820,000 Credit and Collection Expense ($.03 x 1,100,000 + $72,000) - $35,000 = $105,000 - $35,000 = $70,000 LON-CAPA Problem #7: Variance Analysis...
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