Exam 9: Flexible Budgets and Performance Analysis

Lubinsky Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of August, it assumed that 28 wells would have been serviced. However, 31 wells were actually serviced during August. Required: Prepare a report showing the company's activity variances for August. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Gordin Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 3,020 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The activity variance for administrative expenses in May would be closest to:

If the actual level of activity differs from what was planned, it would be misleading to compare actual costs to the static, unchanged planning budget.

Skoff Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March. When the company prepared its planning budget at the beginning of March, it assumed that 35 containers would have been refurbished. However, 32 containers were actually refurbished during March. The spending variance for "Other expenses" for March would have been closest to:

Chaloux Clinic bases its budgets on the activity measure patient-visits. During July, the clinic planned for 3,100 patient-visits. The clinic has provided the following data concerning the formulas it uses in its budgeting: The clinic has also furnished its income statement for July: Required: Prepare a report showing the clinic's activity variances for July.

Benjamin Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of March, it assumed that 26 containers would have been refurbished. However, 23 containers were actually refurbished during March. The amount shown for "Employee salaries and wages" in the planning budget for March would have been closest to:

Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6,700 units, but its actual level of activity was 6,670 units. The company has provided the following data concerning the formulas to be used in its budgeting: The activity variance for net operating income in March would be closest to:

Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,700 tenant-days, but its actual level of activity was 3,650 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Actual results for December: The activity variance for administrative expenses in December would be closest to:

A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget.

Schoening Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for January. When the company prepared its planning budget at the beginning of January, it assumed that 40 containers would have been refurbished. However, 38 containers were actually refurbished during January. The activity variance for "Refurbishing materials" for January would have been closest to:

Leven Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 3,050 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for September: The administrative expenses in the planning budget for September would be closest to:

Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears below: The total cost at the activity level of 5,200 guest-days per month should be:

Schoening Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for January. When the company prepared its planning budget at the beginning of January, it assumed that 40 containers would have been refurbished. However, 38 containers were actually refurbished during January. The amount shown for revenue in the planning budget for January would have been closest to:

Boan Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting: In August, the school budgeted for 1,590 students and 110 courses. The school's income statement showing the actual results for the month appears below: Required: Prepare a report showing the school's activity variances for August. Label each variance as favorable (F) or unfavorable (U).

Benjamin Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of March, it assumed that 26 containers would have been refurbished. However, 23 containers were actually refurbished during March. The amount shown for total expenses in the planning budget for March would have been closest to:

Korsak Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. The planning budget for October was based on serving 23 customers, but a total of 19 customers were actually served during October. The activity variance for "Travel expenses" for October would have been closest to:

Blakesley Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of January, it assumed that 38 customers would have been served. However, 42 customers were actually served during January. Required: Prepare a report showing the company's activity variances for January. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,200 units, but its actual level of activity was 6,160 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June: Data used in budgeting: Actual results for June: The activity variance for net operating income in June would be closest to:

The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.

Dure Corporation's cost formula for its selling and administrative expense is $24,500 per month plus $1 per unit. For the month of July, the company planned for activity of 7,200 units, but the actual level of activity was 7,160 units. The actual selling and administrative expense for the month was $31,460. The activity variance for selling and administrative expense in July would be closest to: