Exam 2: Flexible Budgets and Performance Analysis

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 flexible budget for May would be closest to:

Ruetz Clinic uses client-visits as its measure of activity. During November, the clinic budgeted for 2,500 client-visits, but its actual level of activity was 2,520 client-visits. The clinic 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:

Pearse 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 3,000 tenant-days, but its actual level of activity was 2,980 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 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 December would be closest to:

Wales 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 February, the kennel budgeted for 2,700 tenant-days, but its actual level of activity was 2,730 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: -The net operating income in the planning budget for February would be closest to:

Peixoto Framing's cost formula for its supplies cost is $1,150 per month plus $14 per frame. For the month of July, the company planned for activity of 556 frames, but the actual level of activity was 555 frames. The actual supplies cost for the month was $9,190. The supplies cost in the planning budget for July would be closest to:

Tulip Midwifery's cost formula for its wages and salaries is $2,420 per month plus $388 per birth. For the month of January, the company planned for activity of 119 births, but the actual level of activity was 123 births. The actual wages and salaries for the month was $50,540. The wages and salaries in the flexible budget for January would be closest to:

Sorrow 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 November, the kennel budgeted for 2,300 tenant-days, but its actual level of activity was 2,350 tenant-days. The kennel 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 activity variance for administrative expenses in November would be closest to:

Buonocore Clinic uses client-visits as its measure of activity. During August, the clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,770 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for August: Data used in budgeting: Actual results for August: -The revenue variance for August would be closest to:

Rossetto Corporation bases its budgets on the activity measure customers served. During January, the company planned to serve 30,000 customers, but actually served 33,000 customers. Revenue is $4.10 per customer served. Wages and salaries are $36,000 per month plus $1.50 per customer served. Supplies are $0.50 per customer served. Insurance is $12,000 per month. Miscellaneous expenses are $4,800 per month plus $0.10 per customer served. Required: Prepare a report showing the company's activity variances for January. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Borunda 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 $37,020 per month plus $2,731 per flight plus $6 per passenger. The company expected its activity in July to be 73 flights and 253 passengers, but the actual activity was 75 flights and 251 passengers. The actual cost for plane operating costs in July was $231,770. The activity variance for plane operating costs in July would be closest to:

Shingler Corporation bases its budgets on the activity measure customers served. During May, the company planned to serve 39,000 customers. The company has provided the following data concerning the formulas it uses in its budgeting: The company has also furnished its income statement for May: Required: Prepare a report showing the company's activity variances for May. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Pearse 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 3,000 tenant-days, but its actual level of activity was 2,980 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 net operating income in the planning budget for December would be closest to:

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 food and supplies in the flexible budget for June would be closest to:

Fortmann 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 September, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,010 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: -The activity variance for net operating income in September would be closest to:

At Worthe Corporation, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $7,920 for the month and that the associated spending variance was $240 F. If 10,200 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) closest to:

Paye Clinic uses patient-visits as its measure of activity. The following report compares the planning budget to the actual operating results for the month of January: Required: Prepare the clinic's flexible budget performance report for January. Label each variance as favorable (F) or unfavorable (U).

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 cleaning equipment and supplies in the flexible budget for September would be closest to:

Amundson 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 September, the company budgeted for 456 guests and 155 jeeps. The company's income statement showing the actual results for the month appears below: Required: Prepare a report showing the company's revenue and spending variances for September. Label each variance as favorable (F) or unfavorable (U).

Jiminian Clinic uses client-visits as its measure of activity. During March, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,660 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for March: Data used in budgeting: Actual results for March: -The net operating income in the flexible budget for March would be closest to:

A flexible budget should not be used when making comparisons to actual results such as actual expenses.