Homework - Complete homework exercises in Word or Excel.
EXERCISE 1 - PREPARE A FLEXIBLE BUDGET
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company's planning budget for May appears below:
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Puget Sound Divers Planning Budget For the Month Ended May 31
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Budgeted diving-hours (q)
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100
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Revenue ($365.00q)
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$36,500
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|
|
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Expenses:
|
|
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Wages and salaries ($8,000 + $125.00q)
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20.500
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Supplies ($3.00q)
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300
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Equipment rental ($1,800 + $32.00q)
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5,000
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Insurance ($3,400)
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3,400
|
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Miscellaneous ($630 + $1.80q)
|
810
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|
|
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Total expense
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30,010
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|
|
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Net operating income
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$6,490
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Required: During May, the company's activity was actually 105 diving-hours. Prepare a flexible budget for that level of activity.
EXERCISE 2 - PREPARE A REPORT SHOWING ACTIVITY VARIANCES
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Flight Café Planning Budget For the Month Ended July 31
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Budgeted meals (q)
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18,000
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Revenue ($4.50q)
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$81,000
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Expenses:
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|
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Raw materials ($2.40q)
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43,200
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Wages and salaries ($5,200 + $0.30q)
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10,600
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Utilities ($2,400 + $0.05q)
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3,300
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Facility rent ($4,300)
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4,300
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Insurance ($2,300)
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2,300
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Miscellaneous ($680 + $0.10q)
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2,480
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Total expense
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66,180
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Net operating income
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$14,820
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In July, 17,800 meals were actually served. The company's flexible budget for this level of activity appears below:
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Flight Café Flexible Budget For the Month Ended July 31
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Budgeted meals (q)
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17,800
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Revenue ($4.50q)
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$80,100
|
|
Expenses:
|
|
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Raw materials ($2.40q)
|
42,720
|
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Wages and salaries ($5,200 + $0.30q)
|
10,540
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Utilities ($2,400 + $0.05q)
|
3,290
|
|
Facility rent ($4,300)
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4,300
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Insurance ($2,300)
|
2,300
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Miscellaneous ($680 + $0.10q)
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2,460
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Total expense
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65,610
|
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Net operating income
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$14,490
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Required:
1. Prepare a report showing the company's activity variances for July.
2. Which of the activity variances should be of concern to management? Explain.
EXERCISE 3 - PREPARE A REPORT SHOWING REVENUE AND SPENDING VARIANCES
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Quilcene Oysteria Flexible Budget For the Month Ended August 31
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Actual pounds (q)
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8,000
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Revenue ($4.00q)
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$32,000
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Expenses:
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|
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Packing supplies ($0.50q)
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4,000
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Oyster bed maintenance ($3,200)
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3,200
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Wages and salaries ($2,900 +$0.30q)
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5,300
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Shipping ($0.80q)
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6,400
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Utilities ($830)
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830
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Other ($450 + $0.05q)
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850
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Total expense
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20,580
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Net operating income
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$11,420
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The actual results for August appear below:
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Quilcene Oysteria Income Statement For the Month Ended August 31
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Actual pounds
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8,000
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Revenue
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$35,200
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Expenses:
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|
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Packing supplies
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4,200
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Oyster bed maintenance
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3,100
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Wages and salaries
|
5,640
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Shipping
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6,950
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Utilities
|
810
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Other
|
980
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Total expense
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21,680
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Net operating income
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$13,520
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REQUIRED: Prepare a report showing the company's revenue and spending variances for August.
EXERCISE 4 - PREPARE A FLEXIBLE BUDGET PERFORMANCE REPORT
Vulcan Flyovers offers scenic over flights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company's operations in July appear below:
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Vulcan Flyovers Operating Data For the Month Ended July 31
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Planning
Budget
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Flexible
Budget
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Actual
Budget
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Flights (q)
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48
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48
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50
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Revenue ($320.00q)
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$13,650
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$15,360
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$16,000
|
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Expenses:
|
|
|
|
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Wages and salaries ($4,000 + $82.00q)
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8,430
|
7,936
|
8,100
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Fuel ($23.00q)
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1,260
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1,104
|
1,150
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Airport fees ($650 + $38.00q)
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2,350
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2,474
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2,550
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Aircraft depreciation ($7.00q)
|
336
|
336
|
350
|
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Office expenses ($190 + $2.00q)
|
460
|
286
|
290
|
|
Total expense
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12,836
|
12,136
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12,440
|
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Net operating income
|
$814
|
$3,224
|
$3,560
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The company measures its activity in terms of flights. Customers can buy individual tickets for over flights or hire an entire plane for an over flight at a discount.
REQUIRED:
1. Prepare a flexible budget performance report for July.
2. Which of the variances should be of concern to management? Explain.
EXERCISE 5 - DIRECT MATERIALS VARIANCES
Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company's products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000.
According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.
Required:
1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?
2. Break down the difference computed in requirement into a materials price variance and a materials quantity variance.
EXERCISE 6 - DIRECT LABOR VARIANCES
Sky Chefs Inc, prepares in-flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labor-hours. The company paid this direct labor worker a total of $9,600 for this work, or $10.00 per hour.
According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour.
Required:
1. According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost?
2. Break down the difference computed in requirement 1 into a labor rate variance and a labor efficiency variance.
EXERCISE 7 - VARIABLE OVERHEAD VARIANCES
Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.
In the most recent month, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs.
According to the company's standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour.
Required:
1. What variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost?
2. Break down the difference computed 1 into a variable overhead rate variance and a variable overhead efficiency variance.
EXERCISE 8 - DIRECT MATERIALS AND DIRECT LABOR VARIANCES
Dawson Toys, LTD., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:
Direct Materials: 6 microns per toy at $0.50 per micron
Direct labor: 1.3 hours per toy at $8 per hour.
During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow:
Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.
Direct Labor: 4,000 direct labor-hours were worked at a cost of $36,000.
Required:
1. Compute the following variances for July:
a. The materials price and quantity variances.
b. the labor rate and efficiency variances.
2. Prepare a brief explanation of the possible causes of each variance.