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Unformatted text preview: (15 min.) E 10-15 This Year Actual Last Year Actual Variance Sales revenue (8,000 $200; 10,000 $150) $1,600,000 $1,500,000 $100,000 Variable expenses (0.80 sales) (1,280,000) (1,200,000) (80,000) Fixed expenses (100,000 ) (100,000 )-0- Net income $ 220,000 $ 200,000 $ 20,000 Based on Whites performance evaluation technique, the chain performed well this year. Income was up 10% ($20,000 / $200,000) from the previous year. However, this analysis should not be the only basis for evaluating performance. It does not take into account the higher sale price of the suitcases that were sold this year, the lower volume that often accompanies the sale of more expensive goods, or any changes in competition or local economic conditions. A better system would compare this years actual results with this years budget, which considers all factors that affect this years operations. (5 min) S 11-3 1. The master budget indicates that Surf-side planned to sell 5 pools in April. 2. The actual results indicate that Surf-side sold 6 pools in April. 3. The flexible budget for performance reports is always based on the actual output for the month. This is done so that managers can compare apples-to-apples: meaning they can compare actual revenues and expenses to those they would expect to achieve given the same volume. Therefore, Surf-sides flexible budget is based on 6 pools. 4. Since both the flexible budget and master budget are based on the same revenue assumptions, we can find the budgeted sales price per pool from either one: Flexible budget data: $108,000 6 pools = $18,000 per pool Master budget data: $ 90,000 5 pools = $18,000 per pool (continued) S 11-3 5. Since both the flexible budget and master budget are based on the same variable cost assumptions, we can find the budgeted variable cost pool from either one: Flexible budget data: $60,000 6 pools = $10,000 per pool Master budget data: $50,000 5 pools = $10,000 per pool 6. The sales volume variance is the difference between the static (master) budget and the flexible budget. As the name suggests, this variance arises only because the number of units actually sold (6 pools) differs from the volume originally planned for in the static master budget (5 pools). 7. As the name suggests, the flexible budget variance is the difference between the flexible budget and the actual results. Since both the actual results and the flexible budget are based on the same volume of output (6 pools), this variance highlights unexpected revenues and expenses that are caused by factors other than volume. (5 min.) S 11-8 The standard direct material cost of each regular hamburger is calculated as follows: Quantity Standard Price Standard = Standard Cost of Input 1 bun $0.10 per bun = $0.10 1 hamburger patty $0.20 per patty = 0.20 1 pickle slice $0.03 per slice = 0.03 1/8 teaspoon onion $0.08 per teaspoon = 0.01 teaspoon mustard $0.04 per teaspoon = 0.01 ounce ketchup...
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