Chapter 10: Using Budgets for Planning and Coordination
(b)
Material quantity variance = AQ SQ SP
F
40 000 59,000
000
,$100
$500,
(c) Yes, the relationship with this new supplier should be maintained
because it appears the supplier is providing materials of good quality for
(d)
Direct labor rate variance
AR SR AH
$ , , ,60 000 5000 12 5000
0
(e) Direct labor efficiency variance = (AH – SH) × SR
10–48 (a) Material price variance = (AP – SP) AQ
Component X: 0.30 AQ = 160, so AQ = 533.3 units of X.
(b) Material quantity variance = (AQ – SQ) SP
Component X: (533.3 – (1 220)) SP = 168, so SP = $0.536 per unit of X.
10–49 Planned number of batches
1000 000
25 000 40
, ,
,
1125 000
, ,
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 404 –
PROBLEMS
10–50
Borders Manufacturing Production Plan
Month
Production (rounded)
January
(8,742 .5) (9,415 .5) 9,079
February
(9,415 .5) (7,120 .5) 8,268
March
(7,120 .5) (8,181 .5) 7,651
April
(8,181 .5) (7,942 .5) 8,062
May
(7,942 .5) (9,681 .5) 8,812
June
(9,681 .5) (2,511 .5) 6,096
July
(2,511 .5) (2,768 .5) 2,640
August
(2,768 .5) (2,768 .5) 2,768
September
(2,768 .5) (2,283 .5) 2,526
October
(2,283 .5) (1,542 .5) 1,913
November
(1,542 .5) (1,980 .5) 1,761
December
(8,725 .5) (1,980 .5) 5,353
Chapter 10: Using Budgets for Planning and Coordination
– 405 –
10–51
Mira Vista Planters
Jan
Feb
Mar
Apr
May
Jun
Demand
8,692
5,765
8,134
34,400
558,729
832,251
Sales revenue (× $0.20)
$1,738
$1,153
$1,627
$6,880
$111,746
$166,450
Planters
Beginning of month
2
1
1
1
5
73
Added a
0
0
0
4
68
14
Trained b (whole numbers)
0
0
0
7
114
24
Laid off c
1
0
0
0
0
0
Ending
1
1
1
5
73
87
Capacity d
10,000
10,000
10,000
40,000
560,000
835,000
Wages e
$1,600
$1,600
$1,600
$6,400
$89,600
$133,600
Training Costse
0
0
0
2,800
45,600
9,600
Layoff Severance
400
0
0
0
0
0
Total Costs
$2,000
$1,600
$1,600
$9,200
$135,200
$143,200
Profit
($262)
($447)
$27
($2,320)
($23,454)
$23,250
Demand
8,692
5,765
8,134
34,400
558,729
832,251
Beginning capacity
20,000
10,000
10,000
10,000
50,000
730,000
Difference
– 11,308
– 4,235
– 1,866
24,400
508,729
102,251
a New planters needed
0
0
0
4
68
14
5/3 × number needed
0.0
0.0
0.0
6.7
113.3
23.3
b Planters trained
0
0
0
7
114
24
c Planters laid off
1
0
0
0
0
0
d Trainees add to capacity for only 3 weeks of their first month. For April, the capacity is
((1 × 10,000) + (4 × 10,000 × ¾)) = 40,000.
e Trainees are hired at the beginning of the month and receive $400 for a week of training
and 3 weeks of wages at $400 per week. Trained workers receive $1,600 a month.
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 406 –
Mira Vista Planters
Jul
Aug
Sep
Oct
Nov
Dec
Demand
1,286,700
895,449
733,094
203,525
29,410
9,827
Sales revenue (× $0.20)
$257,340
$179,090
$146,619
$40,705
$5,882
$1,965
Planters
Beginning of month
87
143
90
74
21
3
Added a
56
0
0
0
0
0
Trained b (whole
numbers)
94
0
0
0
0
0
Laid off c
0
53
16
53
18
2
Ending
143
90
74
21
3
1
Capacity d
1,290,000
900,000
740,000
210,000
30,000
10,000
Wages e
$206,400
$144,000
$118,400
$33,600
$4,800
$1,600
Training Costse
37,600
0
0
0
0
0
Layoff Severance
0
21,200
6,400
21,200
7,200
800
Total Costs
$244,000
$165,200
$124,800
$54,800
$12,000
$2,400
Profit
$13,340
$13,890
$21,819
($14,095)
($6,118)
($435)
Demand
1,286,700
895,449
733,094
203,525
29,410
9,827
Beginning capacity
870,000
1,430,000
900,000
740,000
210,000
30,000
Difference
416,700
– 534,551
– 166,906
– 536,475
– 180,590
– 20,173
a New planters needed
56
0
0
0
0
0
5/3 × number needed
93.3
0.0
0.0
0.0
0.0
0.0
b Planters trained
94
0
0
0
0
0
c Planters laid off
0
53
16
53
18
2
d Trainees add to capacity for only 3 weeks of their first month. For April, the capacity is
((1 × 10,000) + (4 × 10,000 × ¾)) = 40,000.
e Trainees are hired at the beginning of the month and receive $400 for a week of training
and 3 weeks of wages at $400 per week. Trained workers receive $1,600 a month.
(a) Summing the profits for the 12 months, we see that if each month’s contract is
– 407 –
(c) The number of people laid off (143) is shown in the “laid off” line and in
footnote c.
10–52
Strathfield Motel
Week
1
2
3
4
5
6
7
8
9
10
11
12
Units rented
per night
46
48
54
60
60
60
55
55
50
45
37
30
(a)
Staff employed
4
4
4
4
4
4
4
4
4
3
3
2
Cleaning
capacity per
night
60
60
60
60
60
60
60
60
60
45
45
30
Excess capacity
per night
14
12
6
0
0
0
5
5
10
0
8
0
(b)
Linen contract
units
60
60
60
60
60
60
60
60
50
50
50
50
Excess linen
capacity per
night
14
12
6
0
0
0
5
5
0
5
13
20
10–53
Homebush School Band Estimated Travel Expenses
Month
Concerts
Hotel
Food
Bus
Other
Total
September
3
2,700
1,440
1,800
600
6,540
October
4
3,600
1,920
2,400
800
8,720
November
5
4,500
2,400
3,000
1,000
10,900
December
8
7,200
3,840
4,800
1,600
17,440
January
3
2,700
1,440
1,800
600
6,540
February
4
3,600
1,920
2,400
800
8,720
March
2
1,800
960
1,200
400
4,360
April
5
4,500
2,400
3,000
1,000
10,900
May
7
6,300
3,360
4,200
1,400
15,260
– 408 –
10–54
Worthington Company
Month
Revenue
Cash Sales
Credit
Card Sales
Account
Sales
Total
January
12,369,348
2,473,870
0
0
2,473,870
February
15,936,293
3,187,259
5,999,134
1,484,322
10,670,715
March
13,294,309
2,658,862
7,729,102
3,767,757
14,155,721
April
19,373,689
3,874,738
6,447,740
4,282,625
14,605,103
May
20,957,566
4,191,513
9,396,239
4,701,460
18,289,212
June
18,874,717
3,774,943
10,164,420
5,740,025
19,679,388
July
21,747,839
4,349,568
9,154,238
5,873,569
19,377,375
August
14,908,534
2,981,707
10,547,702
5,943,930
19,473,339
September
11,984,398
2,396,880
7,230,639
5,504,193
15,131,712
October
18,894,535
3,778,907
5,812,433
4,196,356
13,787,696
November
21,983,545
4,396,709
9,163,849
4,422,809
17,983,367
December
20,408,367
4,081,673
10,662,019
5,759,831
20,503,523
Chapter 10: Using Budgets for Planning and Coordination
– 409 –
10–55
Masefield Dairy Ingredient Purchases
Ingredient
July*
August*
September*
Ingredient 1
759,685
668,699
530,425
Ingredient 2
1,307,959
1,141,857
911,474
Ingredient 3
914,870
790,589
641,667
Ingredient 4
800,129
687,840
513,190
Ingredient 5
515,301
470,475
365,560
Ingredient 6
1,366,313
1,207,774
998,986
*Details appear below.
July
Products
Total
Ingredients
A
B
C
D
E
Purchases
1
194,675
209,712
209,855
97,576
47,867
759,685
2
389,350
–
629,565
97,576
191,468
1,307,959
3
–
104,856
419,710
390,304
–
914,870
4
194,675
314,568
–
195,152
95,734
800,129
5
–
209,712
209,855
–
95,734
515,301
6
584,025
104,856
629,565
–
47,867
1,366,313
August
Products
Total
Ingredients
A
B
C
D
E
Purchases
1
162,033
196,750
194,575
75,766
39,575
668,699
2
324,066
–
583,725
75,766
158,300
1,141,857
3
–
98,375
389,150
303,064
–
790,589
4
162,033
295,125
–
151,532
79,150
687,840
5
–
196,750
194,575
–
79,150
470,475
6
486,099
98,375
583,725
–
39,575
1,207,774
September
Products
Total
Ingredients
A
B
C
D
E
Purchases
1
129,857
152,990
170,654
55,966
20,958
530,425
2
259,714
–
511,962
55,966
83,832
911,474
3
–
76,495
341,308
223,864
–
641,667
4
129,857
229,485
–
111,932
41,916
513,190
5
–
152,990
170,654
–
41,916
365,560
6
389,571
76,495
511,962
–
20,958
998,986
– 410 –
10–56
Nathaniel’s Motor Shop
Week
Work
Hours
Overtime
Total
Wages
Variable
Support
1
255
0
6,750
6,375
2
330
15
7,200
8,250
3
300
0
6,750
7,500
4
285
0
6,750
7,125
5
325
10
7,050
8,125
6
280
0
6,750
7,000
7
260
0
6,750
6,500
8
300
0
6,750
7,500
9
340
25
7,500
8,500
10
355
40
7,950
8,875
Chapter 10: Using Budgets for Planning and Coordination
– 411 –
10–57
Country Club Road Nurseries
Cash Outflows
January
February
March
April
May
June
Full-time staff
15
15
15
15
15
15
Full-time hours
2,400
2,400
2,400
2,400
2,400
2,400
Part-time hours
480
480
800
800
2,400
2,400
Cash outflows
Full-time wages
$40,500
$40,500
$40,500
$40,500
$40,500
$40,500
Part-time wages
4,800
4,800
8,000
8,000
24,000
24,000
Variable costs
36,000
36,000
36,000
36,000
12,000
12,000
Capacity-
related costs
55,000
55,000
55,000
55,000
55,000
55,000
Total outflows
$136,300
$136,300
$139,500
$139,500
$131,500
$131,500
July
August
Sept.
October
Nov.
December
Full-time staff
15
15
15
15
15
15
Full-time hours
2,400
2,400
2,400
2,400
2,400
2,400
Part-time hours
2,400
2,400
1,200
600
0
0
Cash outflows
Full-time wages
$40,500
$40,500
$40,500
$40,500
$40,500
$40,500
Part-time wages
24,000
24,000
12,000
6,000
0
0
Variable costs
48,000
48,000
48,000
24,000
0
0
Capacity-
related costs
55,000
55,000
55,000
55,000
55,000
55,000
Total outflows
$167,500
$167,500
$155,500
$125,500
$95,500
$95,500
– 412 –
10–58
(a)
Cash inflows
From September sales: $1,000,000 0.3
$300,000
From October sales: 40,000 $32 0.7
896,000
$1,196,000
Cash outflows
For September purchases: $880,000 0.8
704,000
For October purchases: 38,000 $20 0.2
152,000
Selling and admin.: $350,000 $20,000
330,000
1,186,000
Net cash flow
10,000
Opening cash balance
40,000
Ending cash balance
$50,000
(b)
Sales
40,000 $32 =
$1,280,000
Cost of goods sold
40,000 $20 =
800,000
Gross margin
40,000 $12 =
480,000
Selling and administrative expenses
350,000
Net income
$130,000
10–59
(a)
Merchandise inventory
Units
Dollar value
Required for sales
12,000
$480,000
Desired ending inventory
3,000
120,000
Needs
15,000
600,000
Less beginning inventory
2,000
80,000
Budgeted purchases
13,000
$520,000
(b)
Sales
12,000 $60 =
$720,000
Cost of goods sold
12,000 $40 =
480,000
Gross margin
12,000 $20 =
240,000
Selling and admin. expenses
200,000
Net income
$40,000
(c)
Cash inflows
From Nov. sales: $600,000 .4
$240,000
From Dec. sales: $720,000 .6
432,000
$672,000
Cash outflows
For Nov. purchases: $340,000 .5
170,000
For Dec. purchases: $520,000 .5
260,000
Selling and admin.: $200,000 $40,000
160,000
590,000
Net cash flow
82,000
Opening cash balance
30,000