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E10-21A - Student Mukhtar Lakha Instructor Robert Nicholson...

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Unformatted text preview: Student: Mukhtar Lakha Instructor: Robert Nicholson Date: 11/20/11 E10-21A (similar to) Course: Acct2302-7502-Robert Nicholson-Fall 2011 Book: Braun: Managerial Accounting, 26 Time: 8:14 PM Kool - Time installed eight pools during March. Prepare an income statement performance report for Kool - Time table below as a guide. (Click the icon to view the table.) Assume that the actual sales price per pool is $13,600, actual variable expenses total $64,500, and actual fixed 6 $19,600 in March. The master budget was prepared with the following assumptions: variable cost of $8,300 per p of $20,900 per month; anticipated sales volume of seven pools at $13,600 per pool. Requirement 1. Compute the sales volume variance and flexible budget variance. Use these variances to explain to Kool -' why March's operating income differs from operating income shown in the static budget. Prepare an income statement report for Kool - Time for March. (For accounts with a 0 balance, make sure to ent the appropriate column. Label each variance as favorable (F) or unfavorable (U). If the variance is zero, do not 56 label.) Kool-Time Pools Income Statement Performance Report Month Ended March 31 Flexible Budget for Actual Results at Flexible Budget Actual Number of Sales Volume Static Actual Prices Variance Output Units Variance Bl Output units 8 V 0V 8 V 1 V F V_ Sales revenue $ 108,800 V 8 0 V $ 108,800 V $ 13,600V F V 8— Variable expenses 64,500 V 1,900 V F V 66,400 V 8,300 V U V Fixed expenses 19,600 V 1,300V F V 20,900 V 0 V _ Total expenses 84,100 V 3,200V F V 87,300 V 8,300V U V_ Operating income $ 24,700 V 8 3,200V F V $ 21,500 V 8 5,300V F V $ Use the sales volume variance and flexible budget variance to explain to Kool — Time's management why March' operating income differs from operating income shown in the static budget. Kool - Time‘s actual operating income was $ 8,500V more than‘ the static budget. There are two primary reason: 1. Kool — Time actually installed one more pool than expected. This increased V operating income by $ 5,300V 2. Kool - Time's actual expenses to install 8 pools were $ 3,200V less than they should have been to install 8 r This favorable flexible budget variance means that Kool - Time did a better-than-expected job controlling 1 Data Table Page 1 Student: Mukhtar Lakha Course: Acct2302-7502-Robert Nicholson-Fall 201 1 Instructor: Robert Nicholson Book: Braun: Managerial Accounting, 2e Date: 11/20/11 Time: 8:14 PM E10-21A Kool—Time Pools (Slmflar Income Statement Performance Report to) Month Ended June 30 (cont) (1) (2) (3) (4) (5) (1)—(3) Flexible (3)-(5) Actual Budget Results Flexible for Actual Sales Static at Actual Budget Number of Volume (Master) Prices Variance Output Units* Variance Budget* Output units (pools installed) 10 -0- 10 2 F 8 Sales revenue $121,000 $1,000 F $120,000 $24,000 F $96,000 Variable expenses 83,000 3,000 U 80,000 16,000 F 64,000 Fixed expenses 22,000 2,000 U 20,000 -0- 20,000 Total expenses 105,000 5,000 U 100,000 16,000 U 84,000 Operating income $ 16,000 $4,000 U $ 20,000 $ 8,000 F $12,000 L J" —) Flexible budget variance, Sales volume variance, $4,000 U $8,000 F Static budget variance, $4,000 F * Budgeted sale price is $12,000 per pool, budgeted variable expense is $8,000 per pool, and budgeted total mor expenses are $20,000. Kool-Time Pools Income Statement Performance Report Month Ended March 31 Flexible Budget for Actual Results at Flexible Budget Actual Number of 5 Actual Prices Variance Output Units Outputunits 25000 nothing not... nothing _ Sales revenue nothing nothing not... nothing _ Variable expenses nothing nothing not... nothing Fixed expenses nothing nothing not... nothing _ Total expenses nothing nothing not... nothing _ Operating income nothing nothing not... nothing YOU ANSWERED: 15 less than decreased Page 2 Student: Mukhtar Lakha Course: Acct2302-7502—Robert Nicholson-Fall 201 1 Instructor: Robert Nicholson Book: Braun: Managerial Accounting, 26 Date: 11/20/11 Time: 8:14 PM E10-21A 200 (similar 17000 to) (cont) Page 3 ...
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