ch10 - SOLUTIONS TO EXERCISESSET B EXERCISE 10-1B (a) SANTO...

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SOLUTIONS TO EXERCISES—SET B EXERCISE 10-1B (a) SANTO COMPANY Selling Expense Report For March By Month Year-to-Date Month Budget Actual Difference Budget Actual Difference January $30,000 $31,000 $1,000 U $ 30,000 $ 31,000 $1,000 U February $37,000 $35,500 $1,500 F $ 67,000 $ 66,500 $ 500 F March $45,000 $53,000 $8,000 U $112,000 $119,500 $7,500 U (b) The purpose of the Selling Expense Report is to help management control selling expenses. The primary recipient is the sales manager. (c) Most likely, when management scrutinized the results for January and February, they would determine that the difference was insignificant (3.3% in January and 4.1% in February), and require no action. When the March results are examined, however, the fact that the difference is 17.8% of budget would probably cause management to investigate further. As a result of their investigation, management would either take corrective action or modify the amounts of budgeted selling expense for future months to reflect changing conditions. EXERCISE 10-2B LYMAN COMPANY Monthly Flexible Manufacturing Overhead Budget For the Year 2008 Activity level Direct labor hours Variable costs Indirect labor ($.80) Indirect materials ($.50) Utilities ($.40) Total variable costs ($1.70) Fixed costs Supervision Depreciation Property taxes Total fixed costs 7,000 $ 5,600 3,500 2,800 11,900 4,000 2,000 800 6,800 8,000 $ 6,400 4,000 3,200 13,600 4,000 2,000 800 6,800 9,000 $ 7,200 4,500 3,600 15,300 4,000 2,000 800 6,800 10,000 $ 8,000 5,000 4,000 17,000 4,000 2,000 800 6,800 © 2008 For Instructor Use Only 10-1
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Total costs $18,700 $20,400 $22,100 $23,800 EXERCISE 10-3B (a) LYMAN COMPANY Manufacturing Overhead Budget Report (Flexible) For the Month Ended July 31, 2008 Difference Direct labor hours (DLH) Variable costs Indirect labor Indirect materials Utilities Total variable costs Fixed costs Supervision Depreciation Property taxes Total fixed costs Total costs Budget at 9,000 DLH $ 7,200 4,500 3,600 15,300 4,000 2,000 800 6,800 $22,100 Actual Costs 9,000 DLH $ 7,100 4,300 3,200 14,600 4,000 2,000 800 6,800 $21,400 Favorable F Unfavorable U $100 F 200 F 400 F 700 F $700 F (b) LYMAN COMPANY Manufacturing Overhead Budget Report (Flexible) For the Month Ended July 31, 2008 Difference Direct labor hours (DLH) Variable costs Indirect labor Indirect materials Utilities Total variable costs Fixed costs Supervision Depreciation Property taxes Total fixed costs Total costs Budget at 8,500 DLH $ 6,800 4,250 3,400 14,450 4,000 2,000 800 6,800 $21,250 Actual Costs 8,500 DLH $ 7,100 4,300 3,200 14,600 4,000 2,000 800 6,800 $21,400 Favorable F Unfavorable U $300 U 50 U 200 F 150 U $150 U (c) In case (a) the performance for the month was satisfactory. In case (b) management may need to determine the causes of the unfavorable differences for indirect labor and indirect materials, or since the differences © 2008 For Instructor Use Only 10-2
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are small, 4.4% of budgeted cost for indirect labor and 1.2% for indirect materials, they might be considered immaterial. EXERCISE 10-4B MORDICA COMPANY Monthly Flexible Selling Expense Budget For the Year 2008 Activity level Sales Variable expenses Sales commissions (7%) Advertising (4%) Traveling (3%) Delivery (2%) Total variable expenses (16%) Fixed expenses Sales salaries Depreciation Insurance Total fixed expenses Total expenses $170,000 $ 11,900 6,800 5,100 3,400 27,200 36,000 7,000 1,000 44,000 $ 71,200 $180,000 $ 12,600 7,200 5,400 3,600 28,800 36,000 7,000 1,000 44,000 $ 72,800 $190,000 $ 13,300 7,600 5,700 3,800 30,400 36,000 7,000 1,000 44,000 $ 74,400 $200,000 $ 14,000 8,000 6,000 4,000 32,000 36,000 7,000 1,000 44,000 $ 76,000 EXERCISE 10-5B (a) MORDICA COMPANY Selling Expense Budget Report (Flexible) For the Month Ended March 31, 2008
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ch10 - SOLUTIONS TO EXERCISESSET B EXERCISE 10-1B (a) SANTO...

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