Managerial Accounting 1B Ch21

Mesa Company’s fixed budget for
the first quarter of calendar year 2011 reveals the following.

Prepare flexible budgets that show
variable costs per unit, fixed costs, and three different flexible budgets
for sales volumes of 7,500, 10,000, and 12,500 units. (Round your “Variable amount per unit” to 2
decimal places. Input all amounts as positive values. Omit the
“$” sign in your response.)

MESA COMPANY

Flexible Budgets
For Quarter Ended March 31, 2011

Flexible
Budget

Daytec Company’s fixed budget
performance report for June follows. The $440,000 budgeted expenses include
$300,000 variable expenses and $140,000 fixed expenses. Actual expenses
include $130,000 fixed expenses.

Prepare a flexible budget
performance report showing any variances between budgeted and actual results.
List fixed and variable expenses separately. (Input
all amounts as a positive value. Indicate the effect of each variance by
selecting “F” for favorable, “U” for unfavorable, and
“None” for no effect (i.e., zero variance). Leave no cells blank –
be certain to enter “0” wherever required. Omit the “$”
sign in your response.)

Sonic Company set the following
standard costs for one unit of its product for 2011.

The $3.00 ($2.50 + $0.50) total
overhead rate per direct labor hour is based on an expected operating level
equal to 75% of the factory’s capacity of 50,000 units per month. The
following monthly flexible budget information is also available.

During the current month, the
company operated at 70% of capacity, employees worked 500,000 hours, and the
following actual overhead costs were incurred.

1.

Compute variable overhead spending
and efficiency variances.(Input all amounts
as a positive value. Indicate the effect of each variance by selecting
“F” for favorable, “U” for unfavorable, and
“None” for no effect (i.e., zero variance). Leave no cells
blank – be certain to enter “0” wherever required. Omit the
“$” sign in your response.)

Spending variances

$

U

Efficiency variances

$

F

2.

Compute Fixed overhead spending
and volume variances.(Input all amounts as a
positive value. Indicate the effect of each variance by selecting
“F” for favorable, “U” for unfavorable, and
“None” for no effect (i.e., zero variance). Leave no cells
blank – be certain to enter “0” wherever required. Omit the
“$” sign in your response.)

Spending variances

$

U

Volume variances

$

U

3.

Compute controllable
variance.(Input all amounts as a positive
value. Indicate the effect of each variance by selecting “F” for
favorable, “U” for unfavorable, and “None” for no effect
(i.e., zero variance). Leave no cells blank – be certain to enter “0”
wherever required. Omit the “$” sign in your response.)

Controllable variance

$

F

BTS Company made 6,000 bookshelves
using 88,000 board feet of wood costing $607,200. The company’s direct
materials standards for one bookshelf are 16 board feet of wood at $7 per
board foot.

(1)

Compute the direct materials
variances incurred in manufacturing these bookshelves. (Do not round your intermediate calculations. Input all amounts
as a positive value. Indicate the effect of each variance by selecting
“F” for favorable, “U” for unfavorable, and
“None” for no effect (i.e., zero variance). Leave no cells blank
– be certain to enter “0” wherever required. Omit the “$”
sign in your response.)

Tuna Company set the following
standard unit costs for its single product.

The predetermined overhead rate is
based on a planned operating volume of 80% of the productive capacity of
60,000 units per quarter. The following flexible budget information is
available.

During the current quarter, the
company operated at 70% of capacity and produced 42,000 units of product;
actual direct labor totaled 250,000 hours. Units produced were assigned the
following standard costs:

Actual costs incurred during the
current quarter follow:

Required:

1.

Compute the direct materials cost
variance, including its price and quantity variances.(Indicate the effect of each variance by selecting
“F” for favorable, “U” for unfavorable, and
“None” for no effect (i.e., zero variance). Input all amounts as
positive values. Leave no cells blank – be certain to enter “0”
wherever required. Omit the “$” sign in your response.)

2.

Compute the direct labor variance,
including its rate and efficiency variances.(Indicate
the effect of each variance by selecting “F” for favorable,
“U” for unfavorable, and “None” for no effect (i.e., zero
variance). Input all amounts as positive values. Leave no cells blank – be
certain to enter “0” wherever required. Omit the “$” sign
in your response.)

3.

Compute the overhead controllable
and volume variances.(Indicate the effect of
each variance by selecting “F” for favorable, “U” for
unfavorable, and “None” for no effect (i.e., zero variance). Input
all amounts as positive values. Leave no cells blank – be certain to enter
“0” wherever required. Omit the “$” sign in your response.)

Controllable variance

$

Fixed overhead volume
variance

$

Pebco Company’s 2011 master budget
included the following fixed budget report. It is based on an expected
production and sales volume of 20,000 units.

PEBCO
COMPANY

Fixed Budget Report
For Year Ended December 31, 2011

1.

Classify all items listed in the
fixed budget as variable or fixed. Also determine their amounts per unit or
their amounts for the year, as appropriate. (Round
your variable amount answers to 2 decimal places. Omit the “$”
sign in your response.)

2.

Prepare flexible budgets for the
company at sales volumes of 18,000 and 24,000 units.(Round your variable
amount per unit answers to 2 decimal places. Input all
amounts as positive values. Omit the “$” sign in your response.)

PEBCO COMPANY

Flexible
Budgets

For Year
Ended December 31, 2011

3.

The company’s business conditions
are improving. One possible result is a sales volume of approximately 28,000
units. The company president is confident that this volume is within the
relevant range of existing capacity. How much would operating income increase
over the 2011 budgeted amount of $125,000 if this level is reached without
increasing capacity?(Do not round
intermediate calculations.Omit the “$” sign in your response.)

Operating income
increase

$

4.

An unfavorable change in business
is remotely possible; in this case, production and sales volume for 2011
could fall to 14,000 units. How much income (or loss) from operations would
occur if sales volume falls to this level?(Input
the amount as positive value. Do not round intermediate
calculations.Omit the “$” sign in your response.)

Potential operating
loss

$

Operating income (loss) at 14,000
units