PROBLEM 10-3A (Continued)
(c) HILL COMPANY
Assembling Department
Flexible Budget Report
For the Month Ended September 30, 2014
Difference
Units
Variable costs
Direct materials (.80 X 64,000)
Direct labor ($.90 X 64,000)
Indirect materials ($.40 X 64,000)
Indirect labor ($.30 X 64,000)
Utilities ($.25 X 64,000)
Maintenance ($.10 X 64,000)
Total variable costs
Fixed costs
Rent
Supervision
Depreciation
Total fixed costs
Total costs
Budget at
64,000 Units
$ 51,200
57,600
25,600
19,200
16,000
6,400
176,000
12,000
17,000
6,000
35,000
$211,000
Actual Costs
64,000 Units
$ 51,700
56,320
26,620
19,250
16,390
6,820
177,100
12,000
17,000
6,000
35,000
$212,100
Favorable F
Unfavorable U
$ 500 U
1,280 F
1,020 U
50 U
390 U
420 U
1,100 U
0U
0U
0U
0U
$1,100 U
again except for direct labor.
Note that actual variable costs in September were 10% higher than
the actual variable costs in August. Therefore to find the actual vari-
able costs in September, the actual variable costs in August must be
PROBLEM 10-4A
(a) CLARKE INC.
Patio Furniture Division
Responsibility Report
For the Year Ended December 31, 2014
Difference
Budget
Actual
Favorable F
Unfavorable U
Sales
Variable costs
Cost of goods sold
Selling and administrative
Total
Contribution margin
Controllable fixed costs
Cost of goods sold
Selling and administrative
Total
Controllable margin
$2,500,000
1,300,000
220,000
1,520,000
980,000
200,000
50,000
250,000
$ 730,000
$2,550,000
1,259,000
226,000
1,485,000
1,065,000
203,000
52,000
255,000
$ 810,000
$50,000 F
41,000 F
6,000 U
35,000 F
85,000 F
3,000 U
2,000 U
5,000 U
$80,000 F
PROBLEM 10-5A
(a) SUPPAN COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2014
(in thousands of dollars)
Difference
Budget
Actual
Favorable F
Unfavorable U
Sales
Variable costs
Cost of goods sold
Selling and administrative
Total
Contribution margin
Controllable direct fixed costs
Cost of goods sold
Selling and administrative
Total
Controllable margin
ROI
$1,300
620
100
720
580
170
80
250
$ 330
16.5%
(1)
$1,400
675
125
800
600
170
80
250
$ 350
17.5%
(2)
$100 F
55 U
25 U
80 U
20 F
0 U
0 U
0 U
$ 20 F
1% F
(3)
PROBLEM 10-5A (Continued)
(c) 1.
$350,000 + ($675,000 X 5%)
$2,000,000
= 19.2%.
2.
$350,000
$2,000,000 –($2,000,000 X 10%)
= 19.4%.
3.
$350,000 + $85,000
$2,000,000
= 21.8%.
PROBLEM 10-6A
(a) No. 1
To Cutting Department Manager—Seattle Division Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
Indirect labor
Indirect materials
Maintenance
Utilities
Supervision
Total
$ 70,000
46,000
18,000
17,000
20,000
$171,000
$ 73,000
47,900
20,500
20,100
22,000
$183,500
$ 3,000 U
1,900 U
2,500 U
3,100 U
2,000 U
$12,500 U
No. 2
To Division Production Manager—Seattle Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
Seattle Division
Departments:
Cutting
Shaping
Finishing
Total
$ 51,000
171,000
148,000
205,000
$575,000
$ 52,500
183,500
158,000
210,000
$604,000
$ 1,500 U
12,500 U
10,000 U
5,000 U
$29,000 U
No. 3
To Vice President—Production Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
V-P Production
Divisions:
Seattle
Denver
San Diego
Total
$ 64,000
575,000
673,000
715,000
$2,027,000
$ 65,000
604,000
678,000
722,000
$2,069,000
$ 1,000 U
29,000 U
5,000 U
7,000 U
$42,000 U
PROBLEM 10-6A (Continued)
No. 4
To President Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
President
Vice-Presidents:
Production
Marketing
Finance
Total
$ 74,200
2,027,000
130,000
104,000
$2,335,200
$ 76,400
2,069,000
133,600
109,000
$2,388,000
$ 2,200 U
42,000 U
3,600 U
5,000 U
$52,800 U
2. At the division manager level, the rankings were: (1) Denver,
3. Rankings in terms of dollars may be somewhat misleading in this
ences and rankings are: (1) production, 2.1%; (2) marketing, 2.8%;
and (3) finance, 4.8%.
*PROBLEM 10-7A
(a) 1. ROI = Controllable Margin ÷ Average Operating Assets
2. Residual Income = Controllable Margin – (Minimum Rate of
Return X Average Operating Assets)
rate of return.
If management of the Jensen Division had used ROI as the performance
measure, the decision would be to reject the project because the ROI
of 19% is less than Jensen’s ROI experience range of 20.1% to 23.5%.
PROBLEM 10-1B
(a) SPEIER COMPANY
Flexible Monthly Manufacturing Overhead Budget
Assembly Department
For the Year 2014
Activity level
Direct labor hours
Variable costs
Indirect labor ($.30)
Indirect materials ($.20)
Repairs ($.15)
Utilities ($.10)
Lubricants ($.05)
Total variable
costs ($.80)
Fixed costs
Supervision
Depreciation
Insurance
Rent
Property taxes
Total fixed costs
Total costs
18,000
$ 5,400
3,600
2,700
1,800
900
14,400
6,300
2,500
1,000
800
500
11,100
$25,500
20,000
$ 6,000
4,000
3,000
2,000
1,000
16,000
6,300
2,500
1,000
800
500
11,100
$27,100
22,000
$ 6,600
4,400
3,300
2,200
1,100
17,600
6,300
2,500
1,000
800
500
11,100
$28,700
24,000
$ 7,200
4,800
3,600
2,400
1,200
19,200
6,300
2,500
1,000
800
500
11,100
$30,300
PROBLEM 10-1B (Continued)
(b) SPEIER COMPANY
Manufacturing Overhead Budget Report (Flexible)
Assembly Department
For the Month Ended January 31, 2014
Difference
Direct labor hours (DLH)
Variable costs
Indirect labor ($0.30)
Indirect materials ($0.20)
Repairs ($0.15)
Utilities ($0.10)
Lubricants ($0.05)
Total variable
costs ($0.80)
Fixed costs
Supervision*
Depreciation
Insurance
Rent
Property taxes
Total fixed costs
Total costs
Budget at
20,000 DLH
$ 6,000
4,000
3,000
2,000
1,000
16,000
6,300
2,500
1,000
800
500
11,100
$27,100
Actual Costs
20,000 DLH
$ 6,200
3,600
2,300
1,700
1,050
14,850
6,300
2,500
1,000
850
500
11,150
$26,000
Favorable F
Unfavorable U
$200 U
400 F
700 F
300 F
50 U
1,150 F
0 U
0 U
0 U
50 U
0U
50 U
$1,100 F
*$75,600/12
PROBLEM 10-2B
(a) GONZALEZ COMPANY
Flexible Monthly Manufacturing Overhead Budget
Assembly Department
For the Year 2014
Activity level
Direct labor hours
Variable costs
Indirect labor ($1.00)
Indirect materials ($.50)
Utilities ($.30)
Maintenance ($.20)
Total variable
costs ($2.00)
Fixed costs
Supervision
Depreciation
Insurance and taxes
Total fixed costs
Total costs
22,500
$22,500
11,250
6,750
4,500
45,000
12,000
8,000
5,000
25,000
$70,000
25,000
$25,000
12,500
7,500
5,000
50,000
12,000
8,000
5,000
25,000
$75,000
27,500
$27,500
13,750
8,250
5,500
55,000
12,000
8,000
5,000
25,000
$80,000
30,000
$30,000
15,000
9,000
6,000
60,000
12,000
8,000
5,000
25,000
$85,000