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Solutions Manual, Chapter 10 1
Chapter 10
Flexible Budgets and Performance Analysis
Solutions to Questions
10-1 The planning budget is prepared for the
10-3 Actual results can differ from the budget
are lumped together.
perhaps misleading for activity variances that
10-6 A revenue variance is the difference
between the actual revenue for the period and
10-8 In a flexible budget performance report,
2 Managerial Accounting for Managers, 4th Edition
separates the differences between the actual
10-10 When actual results are directly
mixed.
Solutions Manual, Chapter 10 3
The Foundational 15
1. The amount of revenue in the flexible budget for May is:
Revenue:
Variable element per customer served (a) .......
$5,000
Actual activity (b) ..........................................
35
Amount in flexible budget (a) × (b) ................
$175,000
2. The amount of employee salaries and wages in the flexible budget for
May is:
Employee salaries and wages:
Variable element per customer served (a) .......
$1,100
Actual activity (b) ..........................................
35
Variable portion of the amount (a) × (b) .........
$38,500
Variable portion of the amount .......................
$38,500
Fixed element per month ...............................
50,000
Amount in flexible budget ..............................
$88,500
3. The amount of travel expenses in the flexible budget for May is:
Travel expenses:
Variable element per customer served (a) .......
$600
Actual activity (b) ..........................................
35
Amount in flexible budget (a) × (b) ................
$21,000
4. The amount of Other Expenses included in the flexible budget for May
5. The net income reported in the flexible budget can be derived by
combining the answers to questions 1-4 as follows:
Revenue ..............................................
$175,000
Employee salaries and wages ................
$88,500
Travel expenses ...................................
21,000
Other expenses ....................................
36,000
145,500
Net operating income ...........................
$ 29,500
4 Managerial Accounting for Managers, 4th Edition
The Foundational 15
6. The revenue variance for May is:
Actual results
Revenue Variance
Flexible Budget
$160,000
$15,000 U
$175,000
7. The employee salaries and wages spending variance for May is:
Actual results
Spending Variance
Flexible Budget
$88,000
$500 F
$88,500
8. The travel expenses spending variance for May is:
Actual results
Spending Variance
Flexible Budget
$19,000
$2,000 F
$21,000
9. The other expenses spending variance for May is:
Actual results
Spending Variance
Flexible Budget
$34,500
$1,500 F
$36,000
10. The amount of revenue in the planning budget for May is:
Revenue:
Variable element per customer served (a) .......
$5,000
Planned level of activity (b) ............................
30
Amount in planning budget (a) × (b) ..............
$150,000
11. The amount of employee salaries and wages in the planning budget for
May is:
Employee salaries and wages:
Variable element per customer served (a) .......
$1,100
Actual activity (b) ..........................................
30
Variable portion of the amount (a) × (b) .........
$33,000
Variable portion of the amount .......................
$33,000
Fixed element per month ...............................
50,000
Amount in planning budget ............................
$83,000
Solutions Manual, Chapter 10 5
The Foundational 15
12. The amount of travel expenses in the planning budget for May is:
Travel expenses:
Variable element per customer served (a) .......
$600
Actual activity (b) ..........................................
30
Amount in planning budget (a) × (b) ..............
$18,000
13. The amount of Other Expenses included in the planning budget for
14. The activity variance for revenue for May is:
Flexible Budget
Activity Variance
Planning Budget
$175,000
$25,000 F
$150,000
15. The activity variances for the expenses for May are as follows:
Flexible
Budget
Activity
Variance
Planning
Budget
Employee salaries and wages
$88,500
$5,500 U
$83,000
Travel expenses
$21,000
$3,000 U
$18,000
Other expenses
$36,000
$0
$36,000
6 Managerial Accounting for Managers, 4th Edition
Exercise 10-1 (10 minutes)
Puget Sound Divers
Flexible Budget
For the Month Ended May 31
Actual diving-hours .....................................
105
Revenue ($365.00q) ...................................
$38,325
Expenses:
Wages and salaries ($8,000 + $125.00q) ...
21,125
Supplies ($3.00q) .....................................
315
Equipment rental ($1,800 + $32.00q) .......
5,160
Insurance ($3,400) ...................................
3,400
Miscellaneous ($630 + $1.80q) .................
819
Total expense .............................................
30,819
Net operating income ..................................
$ 7,506
Solutions Manual, Chapter 10 7
Exercise 10-2 (15 minutes)
1. The activity variances are shown below:
Flight Café
Activity Variances
For the Month Ended July 31
Flexible
Budget
Planning
Budget
Activity
Variances
Meals ..........................................
17,800
18,000
Revenue ($4.50q) ........................
$80,100
$81,000
$900
U
Expenses:
Raw materials ($2.40q) .............
42,720
43,200
480
F
Wages and salaries ($5,200 +
$0.30q) ..................................
10,540
10,600
60
F
Utilities ($2,400 + $0.05q) ........
3,290
3,300
10
F
Facility rent ($4,300) .................
4,300
4,300
0
Insurance ($2,300) ...................
2,300
2,300
0
Miscellaneous ($680 + $0.10q) ..
2,460
2,480
20
F
Total expense ..............................
65,610
66,180
570
F
Net operating income ..................
$14,490
$14,820
$330
U
2. Management should be concerned that the level of activity fell below
what had been planned for the month. This led to an expected decline
8 Managerial Accounting for Managers, 4th Edition
Exercise 10-3 (15 minutes)
Quilcene Oysteria
Revenue and Spending Variances
For the Month Ended August 31
Actual
Results
Flexible
Budget
Revenue
and
Spending
Variances
Pounds .......................................
8,000
8,000
Revenue ($4.00q) ........................
$35,200
$32,000
$3,200
F
Expenses:
Packing supplies ($0.50q) ..........
4,200
4,000
200
U
Oyster bed maintenance
($3,200) ................................
3,100
3,200
100
F
Wages and salaries ($2,900 +
$0.30q) ..................................
5,640
5,300
340
U
Shipping ($0.80q) .....................
6,950
6,400
550
U
Utilities ($830) ..........................
810
830
20
F
Other ($450 + $0.05q) ..............
980
850
130
U
Total expense ..............................
21,680
20,580
1,100
U
Net operating income ..................
$13,520
$11,420
$2,100
F
Solutions Manual, Chapter 10 9
Exercise 10-4 (20 minutes)
1.
Vulcan Flyovers
Flexible Budget Performance Report
For the Month Ended July 31
Actual
Results
Revenue
and
Spending
Variances
Flexible
Budget
Activity
Variances
Planning
Budget
Flights (q) ......................................
48
48
50
Revenue ($320.00q) .......................
$13,650
$1,710
U
$15,360
$640
U
$16,000
Expenses:
Wages and salaries ($4,000 +
$82.00q) ...................................
8,430
494
U
7,936
164
F
8,100
Fuel ($23.00q) .............................
1,260
156
U
1,104
46
F
1,150
Airport fees ($650 + $38.00q) ......
2,350
124
F
2,474
76
F
2,550
Aircraft depreciation ($7.00q) .......
336
0
336
14
F
350
Office expenses ($190 + $2.00q) ..
460
174
U
286
4
F
290
Total expense .................................
12,836
700
U
12,136
304
F
12,440
Net operating income .....................
$ 814
$2,410
U
$ 3,224
$336
U
$ 3,560
2. The overall $336 unfavorable activity variance is due to activity falling below what had been planned
relatively small, but are worth some management attention—particularly if they recur next month.
10 Managerial Accounting for Managers, 4th Edition
Exercise 10-5 (15 minutes)
Alyeski Tours
Planning Budget
For the Month Ended July 31
Budgeted cruises (q1) ..........................................................
24
Budgeted passengers (q2) ...................................................
1,400
Revenue ($25.00q2) ............................................................
$35,000
Expenses:
Vessel operating costs ($5,200 + $480.00q1 +$2.00q2) ......
19,520
Advertising ($1,700) .........................................................
1,700
Administrative costs ($4,300 + $24.00q1 +$1.00q2) ...........
6,276
Insurance ($2,900) ...........................................................
2,900
Total expense .....................................................................
30,396
Net operating income ..........................................................
$ 4,604
