Part 1:
What is the difference between a static budget and a flexible budget?
How does management use these budgets to gain insight into performance?
What are the key business events that trigger the need for flexible budget?
Is it always sales volume above or below expected?
Can inflation or excessive costs lead to flexible budget if volume is not changed?
Describe the variable overhead variances.
How does a manager plan for these variances?
Compare the variable overhead variance to the fixed overhead variance.
What are threats to inventory within the production cycle (both threats to physical inventory and the data related to inventory)?
What specific controls do AIS offer to help prevent or at least detect these threats?
What is a payroll master file?
Describe the types of errors that may occur in the master file and how they get there.
How would you design payroll procedures to help prevent them?
Part 2:
Please complete the below problems and submit your answers in the Week 5 Dropbox. See "Syllabus/Due Dates for Assignments & Exams" for due date information.
1. EM, Inc. private labels mini-cupcakes for Starbucks. For April 2012, it budgeted to purchase and use 18,000 pounds of flour at $0.39 a pound. Actual purchases and usage for April 2012 were 22,000 pounds at $0.42 a pound. EM budgeted to produce 120,000 mini-cupcakes. EM budgets to obtain 4 mini-cupcakes per pound of flour. Actual output was 132,000 mini cupcakes.
a. Compute the flexible-budget variance.
b. Compute the price variance.
c. Compute the efficiency variances.
d. Comment on the results for the requirements above and provide a possible explanation for them.
2. Kool Clothing is a manufacturer of designer dresses. The cost of each dress is the sum of three variable costs (direct materials cost, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead costs are allocated to each dress on the basis of budgeted direct manufacturing labor-hours per dress. For April 2012, each dress is budgeted to take five labor-hours. Budgeted variable manufacturing cost per labor hour is $15. The budgeted number of dresses to be manufactured in April 2012 is 1,250.
Actual variable manufacturing costs in June 2012 were $65,688 for 1,360 dresses started and completed. There was no beginning or ending inventory of dresses. Actual direct manufacturing labor-hours for April were 5,712.
a. Compute the flexible-budget variance.
b. Compute the spending variance.
c. Compute the efficiency variance for variable manufacturing overhead.
d. Comment on the results for the requirements above and provide a possible explanation for them.
Part 3:
What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts?
a. ?An inadvertent data entry error caused an employee's wage rate to be overstated in the payroll master file.
b.? A fictitious employee payroll record was added to the payroll master file.
c.? During data entry, the hours worked on an employee's time card for one day were accidentally entered as 80 hours, instead of 8 hours.
d.? A computer operator used an online terminal to increase her own salary.
e.? A factory supervisor failed to notify the HRM department that an employee had been fired. Consequently, paychecks continued to be issued for that employee. The supervisor pocketed and cashed those paychecks.
f. ?A factory employee punched a friend's time card in at 1:00 P.M. and out at 5:00 P.M. while the friend played golf that afternoon.
g.? A programmer obtained the payroll master file and increased his salary.
h.? Some time cards were lost during payroll preparation; consequently, when paychecks were distributed, several employees complained about not being paid.
i. ?A large portion of the payroll master file was destroyed when the disk pack containing the file was overwritten when used as a scratch file for another application.
j.? The organization was fined $5,000 for making a late quarterly payroll tax payment to the IRS.