Variances budget variances results number of lawns q

Info icon This preview shows pages 20–26. Sign up to view the full content.

View Full Document Right Arrow Icon
Variances Budget Variances Results Number of lawns (Q) 500 550 550 Revenue ($75Q) 37,500 $ 3,750 $ F 41,250 $ 1,750 $ F 43,000 $ Expenses: Wages and salaries ($5,000 + $30Q) 20,000 $ 1,500 $ U 21,500 $ 2,000 $ U 23,500 $ Gasoline and supplies ($9Q) 4,500 450 U 4,950 150 U 5,100 Equipment maintenance ($3Q) 1,500 150 U 1,650 350 F 1,300 Office and shop utilities ($1,000) 1,000 - 1,000 50 F 950 Office and shop rent ($2,000) 2,000 - 2,000 - 2,000 Equipment Depreciation ($2,500) 2,500 - 2,500 - 2,500 Insurance ($1,000) 1,000 - 1,000 200 U 1,200 Total expenses 32,500 2,100 U 34,600 1,950 U 36,550 Net operating income 5,000 $ 1,650 $ F 6,650 $ 200 $ U 6,450 $ Larry's Lawn Service For the Month Ended June 30 Flexible Budget Performance Report $43,000 actual -  $41,250 budget A Performance Report Combining Activity  and Revenue and Spending Variances
Image of page 20

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
9-21 More than one cost  driver may be needed to adequately explain all of the costs in an organization.  The cost formulas used to prepare a flexible budget can be adjusted to recognize multiple cost drivers. Flexible Budgets with Multiple Cost  Drivers
Image of page 21
9-22 Because of the large unfavorable wages and salaries spending variance, Larry decided to add an additional cost driver for wages  and salaries.  The variance is due primarily to the number of  hours required for the additional edging and trimming.  So Larry  estimates the additional hours and builds those hours into both  his revenue and expense budget formulas. Larry’s New Budget Flexible Budgets with Multiple Cost  Drivers
Image of page 22

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
9-23 Flexible Budgets with Multiple Cost  Drivers Revenue/Cost Flexible Formulas Budget Number of lawns (Q) 550 Numer of hours (H) 100 Revenues ($75Q + $30H) 44,250 $ Expenses: Wages and salaries ($5,000 + $30Q + $25H) 24,000 $ Gasoline and supplies ($9Q) 4,950 Equipment maintenance ($3Q) 1,650 Office and shop utilities ($1,000) 1,000 Office and shop rent ($2,000) 2,000 Equipment Depreciation ($2,500) 2,500 Insurance ($1,000) 1,000 Total expenses 37,100 Net operating income 7,150 $ Larry's Lawn Service For the Month Ended June 30 Larry’s Budget Based on More than One Cost Driver
Image of page 23
9-24 Some Common Errors The most common errors when preparing performance reports are to implicitly assume that: 1. All costs are fixed, or that; 2. All costs are variable. Assume all costs are fixed.
Image of page 24

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
9-25 Common Error 1:  Assuming All  Costs Are Fixed Planning Actual Budget Results Variances Number of lawns 500 550 Revenue 37,500 $ 43,000 $ 5,500 $ F Expenses: Wages and salaries 20,000 $ 23,500 $ 3,500 $ U Gasoline and supplies 4,500 5,100 600 U Equipment maintenance 1,500 1,300 200 F Office and shop utilities 1,000 950 50 F Office and shop rent 2,000 2,000 - Equipment Depreciation 2,500 2,500 - Insurance 1,000 1,200 200 U Total expenses 32,500 36,550 4,050 U Net operating income 5,000 $ 6,450 $ 1,450 $ F Larry's Lawn Service For the Month Ended June 30 Faulty Analysis Comparing Budgeted Amounts to Actual Amounts
Image of page 25
9-26 Common Error 2:  Assuming All  Costs Are Variable Planning Planning Budget Actual Budget × 110% Results Variances Number of lawns 500 550 Revenue 37,500 $ 41,250 $ 43,000 $ 1,750 $ F Expenses: Wages and salaries 20,000 $ 22,000 $ 23,500 $ 1,500 $ U Gasoline and supplies 4,500 4,950 5,100 150 U Equipment maintenance 1,500 1,650 1,300 350 F Office and shop utilities 1,000 1,100 950 150 F Office and shop rent 2,000 2,200 2,000 200 F Equipment Depreciation 2,500 2,750 2,500 250 F
Image of page 26
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern