MID-TERM EXAM # 1B
Dr. Jeff Power
Student Number ______________
ANSWER ALL QUESTIONS IN THE SPACE PROVIDED (Back of page if necessary)
DO NOT SEPARATE THE PAGES OF THE EXAM.
YOU HAVE 75 MINUTES TO COMPLETE THE EXAM
SHOW ALL OF YOUR CALCULATIONS FOR POSSIBLE PART MARKS
Horngren Transportation Company executives have had trouble interpreting operating performance for a number of
The company has used a budget based on detailed expectations for the forthcoming quarter set at the beginning
of the quarter.
The reported results of the most recent quarter are as follows:
Supplies and miscellaneous
Total variable costs
Other fixed costs
Total fixed costs
The branch manager was upset about the unfavorable cost variances, but was happy that his overall performance was
His immediate supervisor, the vice-president for operations was totally confused and remarked, “I can see
some merit in comparing actual performance with budgeted performance, because we can see whether actual revenue
coincided with our best guess for budget purposes.
But I can’t see how this performance report helps us evaluate the
overall performance of the branch manager.” Assume that all budgeted selling prices equalled actual selling prices.
Prepare a more appropriate overhead performance report for the last quarter.
Indicate whether the
variances are favourable (F) or unfavourable (U).
Show only a spending variance.
A more appropriate report for performance management and control purposes would be one based on a flexible budget
rather than a static budget Therefore we should prepare a budget for the actual level of activity (sales) that occurred
based or standard rates. Note that the actual selling prices equalled the budgeted selling prices, therefore the flexible
budget sales revenue equals the actual sales revenue.
Flexible Budget /