Exam 9: Performance Measurement in Decentralized Organizations

Bobe 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 $44,580 per month plus $2,390 per flight plus $8 per passenger. The company expected its activity in May to be 68 flights and 211 passengers, but the actual activity was 71 flights and 210 passengers. The actual cost for plane operating costs in May was $215,140. The plane operating costs in the planning budget for May would be closest to:

A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period.

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 overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the revenue and spending variances report) for May would be closest to:

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. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month?

Taccone Corporation makes a product that has the following direct labor standards: In February the company produced 4,100 units using 1,120 direct labor-hours. The actual direct labor rate was $20.40 per hour. The labor efficiency variance for February is:

Linscott Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 5,400 units, but its actual level of activity was 5,380 units. 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: The spending variance for direct materials in July would be closest to:

Vangemert Corporation uses customers served as its measure of activity. During June, the company budgeted for 22,000 customers, but actually served 25,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served: Revenue: $5.30q Wages and salaries: $35,400 + $1.90q Supplies: $0.70q Insurance: $9,600 Miscellaneous expense: $5,000 + $0.10q The company reported the following actual results for June: Required: Prepare a report showing the company's revenue and spending variances for June. Label each variance as favorable (F) or unfavorable (U).

Hartz Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for July was based on 3,100 meals. The diner's director has provided the following cost data to use in the budget: groceries, $2.50 per meal; kitchen operations, $4,700 per month plus $1.75 per meal; administrative expenses, $2,200 per month plus $0.85 per meal; and fundraising expenses, $1,700 per month. The director has also provided the diner's statement of actual expenses for the month: Required: Prepare a report showing the diner's spending variances for each of the expenses and for total expenses for July. Label each variance as favorable (F) or unfavorable (U).

Moates Corporation makes a product with the following standard costs: In January the company produced 5,800 units using 38,740 kilos of the direct material and 1,110 direct labor-hours. During the month, the company purchased 41,000 kilos of the direct material at a total cost of $49,200. The actual direct labor cost for the month was $20,979 and the actual variable overhead cost was $6,993. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

Sund Corporation bases its budgets on the activity measure customers served. During April, the company plans to serve 38,000 customers. The company has provided the following data concerning the formulas it uses in its budgeting: Required: Prepare the company's planning budget for April.

Krejci 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 $41,430 per month plus $2,419 per flight plus $6 per passenger. The company expected its activity in March to be 84 flights and 222 passengers, but the actual activity was 81 flights and 220 passengers. The actual cost for plane operating costs in March was $239,870. The plane operating costs in the planning budget for March would be closest to:

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 materials quantity variance for June is:

Hagel Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,300 client-visits, but its actual level of activity was 2,320 client-visits. The clinic 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: The spending variance for medical supplies in July would be closest to:

Waste on the production line will result in an unfavorable materials quantity variance.

Larance Detailing's cost formula for its materials and supplies is $2,230 per month plus $1 per vehicle. For the month of November, the company planned for activity of 75 vehicles, but the actual level of activity was 25 vehicles. The actual materials and supplies for the month was $2,160. The materials and supplies in the planning budget for November would be closest to:

Labombard Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 3,600 client-visits, but its actual level of activity was 3,650 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The net operating income in the planning budget for February would be closest to:

Coderre Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 7,800 units, but its actual level of activity was 7,780 units. 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: The direct materials in the flexible budget for July would be closest to:

Petroski Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 19,700 skeins and the actual level of activity was 19,900 skeins. The company's owner budgets for dye costs, a variable cost, at $0.67 per skein. The actual dye cost last month was $13,910. In the company's performance report for last month, what would have been the spending variance for dye costs?

Chirico Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 2,500 client-visits, but its actual level of activity was 2,550 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The occupancy expenses in the flexible budget for February would be closest to:

Purchase of poor quality materials may cause a favorable materials price variance and an unfavorable labor efficiency variance.