Solutions -- Week 12

Solutions -- Week 12 - WEEK CLS DATES [M-W] 12 DATES [T-Th]...

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GNB Problem Solutions – Week-by-Week page 1 of 20 WEEK 12 GNB ASSIGNED PROBLEM SOLUTIONS BUAD 250B – FALL 2009 CLS DATES [M-W] DATES [T-Th] TOPICS READINGS ASSIGNMENTS [TO BE COMPLETED BY DATE ASSIGNED] 22 Nov 9 Nov 10 Standard Costs & Operating Performance Measures Ch. 11 BE: 11-2, 3, 4, 5, 6 PR: 10-19 In-class: 11-12 23 Nov 11 Nov 12 Standard Costs Ch. 11 Appx. 11A BE: 11A-1, 2, 3, 4 PR: 11-16; 11A-8 In-class: 11-17; 11A-9 Problem 10-19 1. The variance report should not be used to evaluate how well costs were controlled. In July, the planning budget was based on 150 lessons, but the actual results are for 155 lessons—an increase of more than 3% over budget. Consequently, the actual revenues and many of the actual costs should have been different from what was budgeted at the beginning of the period. For example, instructor wages, a variable cost, should have increased by more than 3% because of the increase in activity, but the variance report assumes that they should not have increased at all. This results in a spurious unfavorable variance for instructor wages. Direct comparisons of budgeted to actual costs are valid only if the costs are fixed. 2. See the table below. 3. The overall activity variance for net operating income was $435 F (favorable). That means that as a consequence of the increase in activity from 150 lessons to 155 lessons, the net operating income should have been up $435 over budget. However, it wasn’t. The budgeted net operating income was $8,030 and the actual net operating income was $8,080, so the profit was up by only $50—not $435 as it should have been. There are many reasons for this—as shown in the revenue and spending variances. Perhaps most importantly, fuel costs were much higher than expected. The spending variance for fuel was $425 U (unfavorable) and may have been due to an increase in the price of fuel that is beyond the owner/manager’s control. Most of the other spending variances were favorable, so with the exception of this item, costs seem to have been adequately controlled. In addition, the unfavorable revenue variance of $200 indicates that revenue was slightly less than they should have been. This variance is very small relative to the size of the revenue, so it may not justify investigation. TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Plannin g Budget Activity Variances Flexible Budget Revenue and Spending Variances Actual Results Lessons (q) . .................................... 150 155 155 Revenue ($220q) . ........................... $33,000 $1,10 0 F $34,100 $200 U $33,900 Expenses: Instructor wages ($65q) . ............. 9,750 325 U 10,075 205 F 9,870 Aircraft depreciation ($38q) . ....... 5,700 190 U 5,890 0 5,890 Fuel ($15q) . ................................ 2,250 75 U 2,325 425 U 2,750 Maintenance ($530 + $12q) . ...... 2,330 60 U 2,390 60 U 2,450 Ground facility expenses ($1,250 + $2q) . ...................... 1,550 10 U 1,560 20 F 1,540 Administration ($3,240 + $1q) . ....................................... 3,390 5 U 3,395 75 F 3,320 Total expense . ................................ 24,970 665 U 25,635 185 U 25,820 Net operating income . .................... $ 8,030 $ 435 F $ 8,465 $385 U $ 8,080
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GNB Problem Solutions – Week-by-Week page 2 of 20 Exercise 11-2 1. Number of helmets . .............................................................................. 35,000 Standard kilograms of plastic per helmet . ............................................ × 0.6 Total standard kilograms allowed . ........................................................ 21,000 Standard cost per kilogram . ................................................................. × RM8 Total standard cost . .............................................................................. RM168,000 Actual cost incurred (given) . ................................................................. RM171,000 Total standard cost (above) . ................................................................ 168,000 Total material variance—unfavorable . ................................................. RM 3,000 2.
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Solutions -- Week 12 - WEEK CLS DATES [M-W] 12 DATES [T-Th]...

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