Exam 9: Flexible Budgets and Performance Analysis

Pargo Corporation bases its budgets on the activity measure customers served. During May, the company planned to serve 29,000 customers, but actually served 30,000 customers. The company has provided the following data concerning the formulas it uses in its budgeting: Required:Prepare the company's flexible budget for May based on the actual level of activity for the month.

Ibsen Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,300 client-visits, but its actual level of activity was 3,340 client-visits. The clinic 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 net operating income in the flexible budget for December would be closest to:

Shiigi Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for May is to be based on 3,300 meals. The diner's director has provided the following cost data to use in the budget: groceries, $3.80 per meal; kitchen operations, $4,600 per month plus $1.25 per meal; administrative expenses, $3,800 per month plus $0.40 per meal; and fundraising expenses, $1,700 per month.Required:Prepare the diner's budget for the month of May. The budget will only contain the costs listed above; no revenues will be on the budget.

Sunn Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During November, the company budgeted for 6,100 units, but its actual level of activity was 6,050 units. The company has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the flexible budget for November would be closest to:

Tennies Clinic uses client-visits as its measure of activity. During November, the clinic budgeted for 3,300 client-visits, but its actual level of activity was 3,290 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for November:Data used in budgeting: Actual results for November: The administrative expenses in the planning budget for November would be closest to:

Courington Detailing's cost formula for its materials and supplies is $2,420 per month plus $9 per vehicle. For the month of August, the company planned for activity of 63 vehicles, but the actual level of activity was 33 vehicles. The actual materials and supplies for the month was $2,840.The spending variance for materials and supplies in August would be closest to:

Kolstad Clinic uses patient-visits as its measure of activity. During September, the clinic budgeted for 2,200 patient-visits, but its actual level of activity was 2,600 patient-visits. The clinic uses the following revenue and cost formulas in its budgeting, where q is the number of patient-visits:Revenue: $61.70qPersonnel expenses: $39,000 + $16.10qMedical supplies: $1,300 + $11.90qOccupancy expenses: $8,200 + $2.20qAdministrative expenses: $5,900 + $0.20qThe clinic reported the following actual results for September: Required:Prepare a report showing the clinic's revenue and spending variances for September. Label each variance as favorable (F) or unfavorable (U).

Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity).

Carlino 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 and the actual results of operations for April. When the company prepared its planning budget at the beginning of April, it assumed that 24 wells would have been serviced. However, 26 wells were actually serviced during April. Required:Prepare a performance report showing the company's activity and revenue and spending variances for April. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 6,400 units, but its actual level of activity was 6,350 units. The company 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 direct materials in the flexible budget for May would be closest to:

Arrison Corporation uses customers served as its measure of activity. During July, the company budgeted for 34,000 customers, but actually served 33,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for July:Data used in budgeting: Actual results for July: Required:Prepare the company's flexible budget performance report for July. Label each variance as favorable (F) or unfavorable (U).

Muehlberger 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. A total of 28 customers were actually served during April. Required: Prepare a flexible budget for the actual level of activity for April.

Courington Detailing's cost formula for its materials and supplies is $2,420 per month plus $9 per vehicle. For the month of August, the company planned for activity of 63 vehicles, but the actual level of activity was 33 vehicles. The actual materials and supplies for the month was $2,840.The activity variance for materials and supplies in August would be 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:

A flexible budget performance report with more than one cost driver will always have more unfavorable revenue and spending variances than a performance report with only one cost driver.

Luckman Corporation bases its budgets on the activity measure customers served. During July, the company plans to serve 32,000 customers. The company has provided the following data concerning the formulas it uses in its budgeting: Required:Prepare the company's planning budget for July.

Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours.What would be the total budgeted overhead cost for next month if the activity level is 2,700 machine-hours rather than 2,800 machine-hours?

Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,900 units, but its actual level of activity was 5,940 units. The company 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 spending variance for direct materials in May would be closest to:

Neeb Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 7,070 units, but its actual level of activity was 7,180 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January: The activity variance for selling and administrative expenses in January would be closest to:

Shevlin Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for July was based on 3,200 meals, but the diner actually served 3,600 meals. The diner's director has provided the following cost data to use in the budget: groceries, $3.35 per meal; kitchen operations, $5,800 per month plus $1.25 per meal; administrative expenses, $3,400 per month plus $0.40 per meal; and fundraising expenses, $1,400 per month.Required:Prepare a report showing the activity variances for each of the expenses and for total expenses for July. Label each variance as favorable (F) or unfavorable (U).