Exam 2: Flexible Budgets and Performance Analysis

Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?

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 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 July would be closest to:

Harmison Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for July was based on 3,000 meals, but the diner actually served 3,500 meals. The diner's director has provided the following cost data to use in the budget: groceries, $2.60 per meal; kitchen operations, $4,300 per month plus $1.80 per meal; administrative expenses, $3,100 per month plus $0.80 per meal; and fundraising expenses, $1,200 per month. Required: Prepare a report showing the activity variances for each of the expenses and for total expenses for July. Label each variance as favorable (F) or unfavorable (U).

The revenue and spending variances are the differences between the flexible budget and the actual results 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 net operating income in the flexible budget for May 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 net operating income in the flexible budget for December 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 activity variance for net operating income in December would be closest to:

An unfavorable activity variance for a variable cost occurs because the actual level of activity is higher than expected when the static planning budget was prepared.

Nicolini 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 October, the kennel budgeted for 2,200 tenant-days, but its actual level of activity was 2,250 tenant-days. The kennel 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 spending variance for food and supplies in October 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 occupancy expenses in the flexible budget for November would be closest to:

Branner Corporation uses customers served as its measure of activity. During June, the company budgeted for 26,000 customers, but actually served 23,000 customers. The company bases its budgets on the following information: Revenue should be $2.80 per customer served. Wages and salaries should be $22,100 per month plus $0.70 per customer served. Supplies should be $0.50 per customer served. Insurance should be $5,200 per month. Miscellaneous expenses should be $2,100 per month plus $0.30 per customer served. The company reported the following actual results for June: Revenue $63,800 Wages and salaries $37,100 Supplies $9,900 Insurance $5,400 Miscellaneous expense $6,200 Required: Prepare the company's flexible budget performance report for June. Label each variance as favorable (F) or unfavorable (U).

During July, Heron Corporation plans to serve 23,000 customers. Revenue is $6.80 per customer served. Wages and salaries are $39,900 per month plus $2.50 per customer served. Supplies are $1.40 per customer served. Insurance is $10,300 per month. Miscellaneous expenses are $4,800 per month plus $0.20 per customer served. Required: Prepare the company's planning budget for July.

Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes.

Rothrock Clinic uses patient-visits as its measure of activity. During December, the clinic budgeted for 3,400 patient-visits, but its actual level of activity was 3,200 patient-visits. The clinic bases its budgets on the following information: Revenue should be $26.20 per patient-visit. Personnel expenses should be $28,200 per month plus $6.70 per patient-visit. Medical supplies should be $1,500 per month plus $3.30 per patient-visit. Occupancy expenses should be $6,800 per month plus $1.00 per patient-visit. Administrative expenses should be $5,000 per month plus $0.20 per patient-visit. The clinic reported the following actual results for December: Required: Prepare the clinic's flexible budget performance report for December. Label each variance as favorable (F) or unfavorable (U).

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 activity variance for net operating income in May would be closest to:

Bruess Clinic uses patient-visits as its measure of activity. During July, the clinic budgeted for 2,700 patient-visits, but its actual level of activity was 3,200 patient-visits. The clinic uses the following revenue and cost formulas in its budgeting, where q is the number of patient-visits: Revenue: $49.60q Personnel expenses: $31,200 + $15.10q Medical supplies: $700 + $9.60q Occupancy expenses: $10,000 + $2.00q Administrative expenses: $7,000 + $0.20q The clinic reported the following actual results for July: Required: Prepare the clinic's flexible budget performance report for July. Label each variance as favorable (F) or unfavorable (U).

Seekell Memorial Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for October was based on 2,500 meals, but the diner actually served 2,900 meals. The diner's director has provided the following cost formulas to use in budgets: Required: Prepare the diner's flexible budget for the actual number of meals served in October. The budget will only contain the costs listed above; no revenues will be on the budget.

Payeur Corporation uses customers served as its measure of activity. The company bases its budgets on the following information: Revenue should be $4.50 per customer served. Wages and salaries should be $38,300 per month plus $1.40 per customer served. Supplies should be $0.80 per customer served. Insurance should be $10,100 per month. Miscellaneous expenses should be $5,400 per month plus $0.40 per customer served. The company reported the following actual results for December: Required: Prepare a report showing the company's revenue and spending variances for December. Label each variance as favorable (F) or unfavorable (U).

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 medical supplies in the flexible budget for August would be closest to:

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a: