Exam 2: Flexible Budgets and Performance Analysis

Lartey Corporation's cost formula for its selling and administrative expense is $22,200 per month plus $27 per unit. For the month of December, the company planned for activity of 5,300 units, but the actual level of activity was 5,270 units. The actual selling and administrative expense for the month was $168,150. -The spending variance for selling and administrative expense in December would be closest to:

Leaphart 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 2,800 tenant-days, but its actual level of activity was 2,840 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: -The wages and salaries in the planning budget for May would be closest to:

Federick Clinic uses client-visits as its measure of activity. During October, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 3,040 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for October: Data used in budgeting: Actual results for October: -The activity variance for administrative expenses in October would be closest to:

In a flexible budget performance report, actual costs should be compared to the flexible budget at the original budgeted activity level.

Mulberry Clinic uses patient-visits as its measure of activity. The clinic bases its budgets on the following information: Revenue should be $48.70 per patient-visit. Personnel expenses should be $27,600 per month plus $14.70 per patient-visit. Medical supplies should be $1,000 per month plus $10.10 per patient-visit. Occupancy expenses should be $9,500 per month plus $2.40 per patient-visit. Administrative expenses should be $3,800 per month plus $0.10 per patient-visit. The clinic reported the following actual results for August: Required: Prepare a report showing the clinic's revenue and spending variances for August. Label each variance as favorable (F) or unfavorable (U).

Fixed costs should be ignored when evaluating how well a manager has controlled costs.

Juenemann 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 3,800 tenant-days, but its actual level of activity was 3,770 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 facility expenses in the flexible budget for December would be closest to:

A flexible budget cannot be used to estimate what costs should have been at a given level of activity.

Vanderhyde 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 3,300 tenant-days, but its actual level of activity was 3,340 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 net operating income in the planning budget for May would be closest to:

Miao Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 2,980 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 administrative expenses in the planning budget for July would be closest to:

Ordway 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 June, the kennel budgeted for 2,100 tenant-days, but its actual level of activity was 2,070 tenant-days. The kennel 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 wages and salaries in the planning budget for June would be closest to:

Ros Corporation's flexible budget cost formula for indirect materials, a variable cost, is $0.90 per unit of output. If the company's performance report for last month shows a $500 unfavorable spending variance for indirect materials and if 8,000 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:

Hepburn Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for July: -The net operating income in the planning budget for July would be closest to:

Diemert Corporation bases its budgets on machine-hours. The company's static planning budget for June appears below: Actual results for the month were: -The spending variance for power costs in the flexible budget performance report for the month should be:

A static planning budget is:

Gandrud 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 June, the kennel budgeted for 2,600 tenant-days, but its actual level of activity was 2,580 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: -The net operating income in the flexible budget for June would be closest to:

Directly comparing static budget costs to actual costs only makes sense if the costs are variable.

Lehnertz Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 7,100 units, but its actual level of activity was 7,150 units. The company 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 manufacturing overhead in the flexible budget for February would be closest to:

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 flexible budget performance report) for May would be closest to:

Viel Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for April was based on 3,100 meals, but the diner actually served 3,300 meals. The diner's director has provided the following cost data to use in the budget: groceries, $3.95 per meal; kitchen operations, $5,200 per month plus $1.40 per meal; administrative expenses, $3,300 per month plus $0.80 per meal; and fundraising expenses, $1,800 per month. Required: Prepare the diner's flexible budget for the actual number of meals served in April. The budget will only contain the costs listed above; no revenues will be on the budget.