Part 4
GUADELUPE COMPANY
Overhead Variance Report
For Month Ended March 31
Volume Variance
Expected production level 80% of capacity
Production level achieved 90% of capacity
Volume variance $6,000 (favorable)
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Fixed overhead costs
Rent of factory building 12,000 12,000 0
* F = Favorable variance; and U = Unfavorable variance.
Title: Problem 23-7BA
QA_Ori:
Part 1
June 30* Goods in Process Inventory 130,000
Direct Materials Quantity Variance 5,000
To record materials costs, including
the favorable quantity and
favorable price variances.
unfavorable rate variance.
* Alternatively, some companies compute and record the
price variance when materials are purchased. This would yield
two separate entries:
(1) Purchase of materials
Raw Materials Inventory 125,00
0
0
Part 2
Under management by exception, the manager would first identify the largest
The largest variance amounts occur for the materials quantity variance, the
After the relatively larger amounts are explained and actions taken, the manager
* The unfavorable volume variance indicates that the company produced
fewer items than expected. Managers would need to determine whether this was
because of declining sales, idle time, breakdowns, or other reasons.
SERIAL TITLE: PROBLEM — SP 23
Serial Title: Problem, Success Systems (30 minutes)
Success Systems
Flexible Budget Performance Report
For Quarter Ended June 30
Flexible Actual
Budget Results Variances
Desk sales (150 units) $187,500 $186,000 $1,500 U
Supporting computations
Total budgeted desk sales $180,000
Serial Title: Problem, Success Systems (concluded)
Total budgeted variable costs for chairs $18,000
Total budgeted variable expenses* $132,500
above
Total actual expenses $163,880
Reporting in Action — BTN 23-1
1. Polaris reports the annual adjustment (remeasurement adjustment or
2. As reported in its footnote, the assets and liabilities of foreign subsidiaries
(e.g. cash and property, plant and equipment) are translated at exchange rates in
Comparative Analysis — BTN 23-2
1. Polaris and Arctic Cat sales figures for the most recent 3 years—data
available from Appendix A—are shown below ($ thousands):
Two Years
Prior
One Year
Prior
Current
Year
One
Year
Ahead
Two
Years
Ahead
2. Predictions will vary among students. Generally, predictions should reflect
both the trend in the company’s sales data and current industry and
economy-wide conditions. Polaris’s sales increased in each of the past two years
QA_Ori:
A typical answer might include four individuals selected from the following
specialty areas (answers will vary among students):
Specialty Information Input and Explanation
Engineer Scientific support for quantity standard.
standards.
The ethical challenge for a manager responsible for setting and/or revising
standards is to select the right individuals for the team and to purposely avoid
biases in establishing the standards.
Title: Communicating in Practice
QA_Ori:
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Variance Cost of Goods Sold Gross Margin
Part 1. Favorable Decrease Increase
Part 2. Unfavorable Increase Decrease
Part 3. A favorable (unfavorable) variance means that actual costs are lower
Title: Taking it to the Net 1
QA_Ori:
Benchmarking is a method whereby organizations try to look to other
organizations to identify “best practices” so as to improve and attain superior
QA_Ori:
Given that a benchmark can be considered as a standard, companies
Teamwork in Action — BTN 23-6
Title: Teamwork in Action
QA_Ori:
Answers will vary depending on the two industries selected. Two examples are
identified and briefly described below:
QA_Ori:
To: Mike McCabe, President
Folsom Custom Skis
Re: Management Accounting Quote Interpretations
Quote 1: “Variances are not explanations”
The author of this quote is emphasizing that variances are only a starting point in
Quote 2: “Management’s goal is not to minimize variances.”
The author of this quote understands that the real objective of management is to
Title: Hitting the Road 1
QA_Ori:
A typical cheese pizza has three main raw materials: dough, sauce, and cheese.
Title: Hitting the Road 2
QA_Ori:
Observe that the national chain probably follows specific measurement rules for
QA_Ori:
These observations reflect an important issue for pizza businesses and for
smaller, local businesses in particular. Excess raw materials applied to food
Title: Global Decision
QA_Ori:
1. Piaggio’s sales figures for the most recent 2 years — data available from
its Website — are shown below (€ thousands)
Sales
One Year
Prior
Current
Year
One Year
Ahead
Two Years
Ahead
increase
2. Predictions will vary among students. Generally, predictions should reflect