Exam 9: Performance Measurement in Decentralized Organizations

Bard Hotel bases its budgets on guest-days. The hotel's static budget for January appears below: The total fixed cost at the activity level of 10,600 guest-days per month should be:

Beakins Corporation produces a single product. The standard cost card for the product follows: During a recent period the company produced 1,200 units of product. Various costs associated with the production of these units are given below: The company records all variances at the earliest possible point in time. Variable manufacturing overhead costs are applied to products on the basis of standard direct labor-hours. The variable overhead rate variance for the period is:

Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests?

Kestner Clinic uses patient-visits as its measure of activity. During September, the clinic budgeted for 3,000 patient-visits, but its actual level of activity was 2,900 patient-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for September: Data used in budgeting: 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).

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the labor efficiency variance for the month?

Zee Corporation has developed the following cost standards for the production of its leather backpacks: Variable overhead at Zee is applied on the basis of direct labor hours. The actual results for last month were as follows: The direct materials purchases variance is computed when the materials are purchased. Required: Compute the following variances for Zee. a. Materials price variance. b. Materials quantity variance. c. Labor efficiency variance. d. Variable overhead rate variance.

During January, Desousa Clinic plans for an activity level of 3,200 patient-visits. Revenue is $38.50 per patient-visit. Personnel expenses are $36,700 per month plus $10.20 per patient-visit. Medical supplies are $1,800 per month plus $6.00 per patient-visit. Occupancy expenses are $7,600 per month plus $1.50 per patient-visit. Administrative expenses are $4,600 per month plus $0.20 per patient-visit. Required: Prepare the clinic's planning budget for January.

The Maxwell Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July: • Actual variable manufacturing overhead cost incurred: $22,620 • Actual machine-hours worked: 1,600 hours • Variable overhead rate variance: $3,420 Unfavorable • Total variable overhead spending variance: $4,620 Unfavorable The standard number of machine-hours allowed for July production is:

Galla Corporation makes a product with the following standard costs: The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for June is:

The standard labor rate per hour defines the company's expected direct labor wage rate per hour, including employment taxes and fringe benefits.

Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits. The clinic 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 net operating income in the planning budget for May would be closest to:

Machain Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's standard variable manufacturing overhead rate is $2.90 per machine-hour. The actual variable manufacturing overhead cost for the month was $15,270. The original budget for the month was based on 5,000 machine-hours. The company actually worked 5,090 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,200 machine-hours. What was the variable overhead efficiency variance for the month?

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: The direct materials purchases variance is computed when the materials are purchased. What is the materials price variance for the month?

Pardoe Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: During March, the following activity was recorded by the company: • The company produced 3,000 units during the month. • A total of 8,000 pounds of material were purchased at a cost of $23,000. • There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse. • During March, 1,600 direct labor-hours were worked at a rate of $6.50 per hour. • Variable manufacturing overhead costs during March totaled $1,800. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for March is:

Gershon Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $38,720 per month plus $2,061 per flight plus $9 per passenger. The company expected its activity in June to be 76 flights and 238 passengers, but the actual activity was 75 flights and 239 passengers. The actual cost for plane operating costs in June was $196,310. The spending variance for plane operating costs in June would be closest to:

Biery Corporation makes a product with the following standard costs: The company produced 4,100 units in April using 5,380 liters of direct material and 2,610 direct labor-hours. During the month, the company purchased 6,000 liters of the direct material at $5.80 per liter. The actual direct labor rate was $19.80 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for April is:

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

The following data have been provided by Leason Corporation: Required: Compute the variable overhead rate variances for lubricants and for supplies. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work!

Capilla Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for October is to be based on 3,300 meals. The diner's director has provided the following cost data to use in the budget: groceries, $2.85 per meal; kitchen operations, $4,100 per month plus $1.25 per meal; administrative expenses, $3,400 per month plus $0.40 per meal; and fundraising expenses, $1,800 per month. Required: Prepare the diner's budget for the month of October. The budget will only contain the costs listed above; no revenues will be on the budget.

During October, Haubold Corporation budgeted for 30,000 customers, but actually served 29,000 customers. Revenue should be $3.80 per customer served. Wages and salaries should be $31,200 per month plus $1.40 per customer served. Supplies should be $0.70 per customer served. Insurance should be $8,500 per month. Miscellaneous expenses should be $3,700 per month plus $0.10 per customer served. Required: Prepare the company's flexible budget for October based on the actual level of activity for the month.