Exam 2: Flexible Budgets and Performance Analysis

A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled.

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 selling and administrative expense in the flexible budget for December would be closest to:

Sinopoli Corporation bases its budgets on machine-hours. The company's static planning budget for September appears below: Required: Prepare a flexible budget for 8,600 machine-hours per month.

Kudej Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $8,360 per month plus $570 per press run plus $910 per book set-up. The company expected its activity in May to be 194 press runs and 74 book set-ups, but the actual activity was 195 press runs and 72 book set-ups. The actual cost for wages and salaries in May was $188,370. -The wages and salaries in the flexible budget for May would be closest to:

Hejl Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $210 per month plus $86 per job plus $15 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 23 jobs and 222 meals, but the actual activity was 28 jobs and 217 meals. The actual cost for catering supplies in March was $5,830. The spending variance for catering supplies in March would be closest to:

If the actual level of activity is 4% less than planned, then the variable costs in the static budget should be decreased by 4% before comparing them to actual costs.

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 manufacturing overhead in the flexible budget for July would be closest to:

Tetrault Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: In February, the company budgeted for 448 guests and 173 jeeps. The company's income statement showing the actual results for the month appears below: Required: Prepare a report showing the company's activity variances for February. Label each variance as favorable (F) or unfavorable (U).

During August, Kociolek Clinic plans for an activity level of 2,800 patient-visits. The clinic uses the following revenue and cost formulas in its budgeting, where q is the number of patient-visits: Revenue: $28.20q Personnel expenses: $22,200 + $7.60q Medical supplies: $1,100 + $5.20q Occupancy expenses: $5,100 + $1.00q Administrative expenses: $3,200 + $0.40q Required: Prepare the clinic's planning budget for August.

Letts 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 7,000 units, but its actual level of activity was 6,970 units. The company has provided the following data concerning the formulas to be used in its budgeting: -The direct materials in the flexible budget for January would be closest to:

Tysor Framing's cost formula for its supplies cost is $2,610 per month plus $17 per frame. For the month of July, the company planned for activity of 710 frames, but the actual level of activity was 712 frames. The actual supplies cost for the month was $14,540. The spending variance for supplies cost in July would be closest to:

Zenon 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 July, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,260 tenant-days. The kennel 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 food and supplies in the flexible budget for July would be closest to:

Kudej Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $8,360 per month plus $570 per press run plus $910 per book set-up. The company expected its activity in May to be 194 press runs and 74 book set-ups, but the actual activity was 195 press runs and 72 book set-ups. The actual cost for wages and salaries in May was $188,370. -The wages and salaries in the planning budget for May would be closest to:

Privett Hospital bases its budgets on patient-visits. The hospital's static planning budget for November appears below: Actual results for the month were: -The spending variance for occupancy costs in the flexible budget performance report for the month is:

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).

Prater 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 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 February: Data used in budgeting: Actual results for February: -The direct labor in the planning budget for February would be closest to:

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 selling and administrative expenses in the planning budget for July would be closest to:

Kari 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 3,200 tenant-days, but its actual level of activity was 3,230 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 administrative expenses in the planning budget for May would be closest to:

Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During September, the company budgeted for 6,700 units, but its actual level of activity was 6,750 units. The company 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: -The activity variance for selling and administrative expenses in September would be closest to:

Eberley Corporation's cost formula for its manufacturing overhead is $25,700 per month plus $10 per machine-hour. For the month of July, the company planned for activity of 5,900 machine-hours, but the actual level of activity was 5,920 machine-hours. The actual manufacturing overhead for the month was $86,800. -The manufacturing overhead in the planning budget for July would be closest to: