Specifically, the following critical elements must be addressed: II. Prepare and Perform a) What are your fixed costs? Segregate them in the budget model. b) Determine how variable costs change as activity measures change. How can this information be applied? c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activity measures or as a cost per unit of activity measure). d) Add actual activity measures to the model. Make sure all information is added accurately. e) Add the flexible budget calculations to the budget model. Make sure all information is accurate. f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances: i. Static budget variance, including sales volume and flexible budget variances ii. Price and efficiency variances for direct materials and direct labor iii. Spending and efficiency variances for variable manufacturing overhead g) Determine the aspects of the budgeting process that are in need of improvement. Justify your response. h) Interpret what budget variances represent. Should all variances be investigated? Guidelines for Submission: Your paper must be submitted using the Student Workbook to present your budgets and variances and a 1–2 page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins to explain your findings

Milestone Two, Part I

Use Tables I through IV on the MDE Manufacturing Budget to complete your calculations.

Refer to Exhibit 7-2 on page 253 of the text

Budget Model From Flexible Budget Calculations Sheet

Actual Flexible Budget Variance Favorable/ Unfavorable Flexible Budget Sales Volume Variance Favorable/ Unfavorable Static Budget

Units Sold 47,000 47,000 -3,000 50,000

Revenues $991,700 $4,700 Favorable $987,000 ($63,000) Unfavorable $1,050,000

Variable Costs

DM-Plastic 248160 211500 225000

DM-Cedar 37741 35250 37500

Direct Manuf. Labor 332760 282000 300000

Variable Manuf. Overhead 2585 2820 3000

Total Variable Costs 621246 531570 565500

Fixed Manuf. Overhead 94500 95000 95000

Total Costs 715746 626570 660500

Gross Margin 275954 389500

Milestone Two, Part II

Use the variance supporting calculation tab to complete your calculations.

Price Variance Efficiency Variance

Direct Materials - Cedar -22560 -14100

Direct Materials - Plastic 1034 -3525

Direct Labor 5640 -56400

Spending Variance Efficiency Variance

Variable Manufacturing Overhead