Week 8 - Accy211: Management Accounting II Autumn Session...

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Accy211: Management Accounting II Autumn Session 2009 Tutorial solutions: Week 8 CHAPTER 7 & 8 Questions Q7-18 Q7-30 Q8-18 Q8-19 Q8-28 7-18: Flexible-budget preparation and analysis. 1. Variance Analysis for Bank Management Printers for September 2009 Level 1 Analysis Actual Results (1) Static-Budget Variances (2) = (1) – (3) Static Budget (3) Units sold Revenue 12,000 $252,000 a 3,000 U $ 48,000 U 15,000 $300,000 c Variable costs 84,000 d 36,000 F 120,000 f Contribution margin Fixed costs Operating income 168,000 150,000 $ 18,000 12,000 U 5,000 U $ 17,000 U 180,000 145,000 $ 35,000 $17,000 U Total static-budget variance 2. Level 2 Analysis Actual Results (1) Flexible- Budget Variances (2) = (1) – (3) Flexible Budget (3) Sales Volume Variances (4) = (3) – (5) Static Budget (5) Units sold 12,000 0 12,000 3,000 U 15,000 Revenue $252,000 a $12,000 F $240,000 b $60,000 U $300,000 c Variable costs 84,000 d 12,000 F 96,000 e 24,000 F 120,000 f Contribution margin 168,000 24,000 F 144,000 36,000 U 180,000 Fixed costs 150,000 5,000 U 145,000 0 145,000 Operating income $ 18,000 $19,000 F $ (1,000 ) $36,000 U $ 35,000 $19,000 F $36,000 U Total flexible-budget Var sales-volume Var $17,000 U Total static-budget variance a 12,000 × $21 = $252,000 d 12,000 × $7 =$ 84,000; b 12,000 × $20 = $240,000 e 12,000 × $8 =$ 96,000 c 15,000 × $20 = $300,000 f 15,000 × $8 =$120,000 3. Level 2 analysis breaks down the static-budget variance into a flexible-budget variance and a sales-volume variance. The primary reason for the static-budget variance being unfavorable ($17,000 U) is the reduction in unit volume from the budgeted 15,000 to an actual 12,000. One explanation for this reduction is the increase in selling price from a budgeted $20 to an actual $21. Operating management was able to reduce variable costs by $12,000 relative to the flexible budget. This reduction could be a sign of efficient management. Alternatively, it could be due to using lower quality materials (which in turn adversely affected unit volume). Page 1 of 5
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7-30: Flexible budget, direct materials and direct manufacturing labor variances. 1.
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This note was uploaded on 12/13/2010 for the course ACCY 201 taught by Professor Kevin during the Three '09 term at University of Wollongong, Australia.

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Week 8 - Accy211: Management Accounting II Autumn Session...

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