Solutions Manual, Chapter 10 11
Exercise 10-6 (10 minutes)
The variance report compares actual results to the planning budget and
should
not
be used to evaluate how well costs were controlled during April.
To evaluate how well revenues and costs were controlled, it is necessary to
12 Managerial Accounting for Managers, 4th Edition
Exercise 10-7 (15 minutes)
The adjusted budget was created by multiplying each item in the budget
To evaluate how well revenues and costs were controlled, it is necessary to
estimate what the revenues and costs should have been for the actual level
Solutions Manual, Chapter 10 13
Exercise 10-8 (20 minutes)
Flexible
Budget
Planning
Budget
Activity
Variances
Repair-hours (q) ……………………..
2,900
2,800
Revenue ($44.50q) ………………….
$129,050
$124,600
$4,450
F
Expenses:
Wages and salaries
($23,200 + $16.30q) …………..
70,470
68,840
1,630
U
Parts and supplies ($8.60q) …….
24,940
24,080
860
U
Equipment depreciation
($1,600 + $0.40q) ………………
2,760
2,720
40
U
Truck operating expenses
($6,400 + $1.70q) ………………
11,330
11,160
170
U
Rent ($3,480) ………………………
3,480
3,480
0
Administrative expenses
($4,500 + $0.80q) ………………
6,820
6,740
80
U
Total expense …………………………
119,800
117,020
2,780
U
Net operating income ……………….
$ 9,250
$ 7,580
$1,670
F
14 Managerial Accounting for Managers, 4th Edition
Exercise 10-9 (10 minutes)
Wyckam Manufacturing Inc.
Planning Budget for Manufacturing Costs
For the Month Ended June 30
Budgeted machine-hours (q) ……..
Direct materials ($4.25q) …………..
Direct labor ($36,800) ………………
Supplies ($0.30q) ……………………
Utilities ($1,400 + $0.05q) ………..
Depreciation ($16,700) …………….
Insurance ($12,700) ………………..
Total manufacturing cost …………..
Solutions Manual, Chapter 10 15
Exercise 10–10 (15 minutes)
Lavage Rapide
Planning Budget
For the Month Ended August 31
Budgeted cars washed (q) ………………………..
9,000
Revenue ($4.90q) …………………………………..
$44,100
Expenses:
Cleaning supplies ($0.80q) ……………………..
7,200
Electricity ($1,200 + $0.15q) ………………….
2,550
Maintenance ($0.20q)…………………………...
1,800
Wages and salaries ($5,000 + $0.30q) ……..
7,700
Depreciation ($6,000) …………………………...
6,000
Rent ($8,000) ……………………………………..
8,000
Administrative expenses ($4,000 + $0.10q) .
4,900
Total expense ………………………………………..
38,150
Net operating income ………………………………
$ 5,950
16 Managerial Accounting for Managers, 4th Edition
Exercise 10–11 (15 minutes)
Lavage Rapide
Flexible Budget
For the Month Ended August 31
Actual cars washed (q) …………………………….
8,800
Revenue ($4.90q) …………………………………..
$43,120
Expenses:
Cleaning supplies ($0.80q) ……………………..
7,040
Electricity ($1,200 + $0.15q) ………………….
2,520
Maintenance ($0.20q)…………………………...
1,760
Wages and salaries ($5,000 + $0.30q) ……..
7,640
Depreciation ($6,000) …………………………...
6,000
Rent ($8,000) ……………………………………..
8,000
Administrative expenses ($4,000 + $0.10q) .
4,880
Total expense ………………………………………..
37,840
Net operating income ………………………………
$ 5,280
Solutions Manual, Chapter 10 17
Exercise 10-12 (20 minutes)
Flexible
Budget
Planning
Budget
Activity
Variances
Cars washed (q) …………………………
8,800
9,000
Revenue ($4.90q) ……………………….
$43,120
$44,100
$980
U
Expenses:
Cleaning supplies ($0.80q) ………….
7,040
7,200
160
F
Electricity ($1,200 + $0.15q) ………
2,520
2,550
30
F
Maintenance ($0.20q)………………..
1,760
1,800
40
F
Wages and salaries
($5,000 + $0.30q) ……………….
7,640
7,700
60
F
Depreciation ($6,000) ………………..
6,000
6,000
0
Rent ($8,000) ………………………….
8,000
8,000
0
Administrative expenses
($4,000 + $0.10q) ………………….
4,880
4,900
20
F
Total expense …………………………….
37,840
38,150
310
F
Net operating income …………………..
$ 5,280
$ 5,950
$670
U
18 Managerial Accounting for Managers, 4th Edition
Exercise 10-13 (20 minutes)
Lavage Rapide
Revenue and Spending Variances
For the Month Ended August 31
Actual
Results
Flexible
Budget
Revenue
and
Spending
Variances
Cars washed (q) ……………………..
8,800
8,800
Revenue ($4.90q) ……………………
$43,080
$43,120
$ 40
U
Expenses:
Cleaning supplies ($0.80q) ………
7,560
7,040
520
U
Electricity ($1,200 + $0.15q) …..
2,670
2,520
150
U
Maintenance ($0.20q)…………….
2,260
1,760
500
U
Wages and salaries
($5,000 + $0.30q) ……………
8,500
7,640
860
U
Depreciation ($6,000) …………….
6,000
6,000
0
Rent ($8,000) ………………………
8,000
8,000
0
Administrative expenses
($4,000 + $0.10q) ………………
4,950
4,880
70
U
Total expense …………………………
39,940
37,840
2,100
U
Net operating income ……………….
$ 3,140
$ 5,280
$2,140
U
Solutions Manual, Chapter 10 19
Exercise 10–14 (30 minutes)
Lavage Rapide
Flexible Budget Performance Report
For the Month Ended August 31
Actual
Results
Revenue
and
Spending
Variances
Flexible
Budget
Activity
Variances
Planning
Budget
Cars washed (q) ……………………………..
8,800
8,800
9,000
Revenue ($4.90q) …………………………...
$43,080
$ 40
U
$43,120
$980
U
$44,100
Expenses:
Cleaning supplies ($0.80q) ………………
7,560
520
U
7,040
160
F
7,200
Electricity ($1,200 + $0.15q) …………..
2,670
150
U
2,520
30
F
2,550
Maintenance ($0.20q)…………………….
2,260
500
U
1,760
40
F
1,800
Wages and salaries
($5,000 + $0.30q) ………………………
8,500
860
U
7,640
60
F
7,700
Depreciation ($6,000) …………………….
6,000
0
6,000
0
6,000
Rent ($8,000) ………………………………
8,000
0
8,000
0
8,000
Administrative expenses
($4,000 + $0.10q) ………………………
4,950
70
U
4,880
20
F
4,900
Total expense …………………………………
39,940
2,100
U
37,840
310
F
38,150
Net operating income ……………………….
$ 3,140
$2,140
U
$ 5,280
$670
U
$ 5,950
20 Managerial Accounting for Managers, 4th Edition
Exercise 10–15 (45 minutes)
1. The planning budget appears below. Note that the report does not
include revenue or net operating income because the production
department is a cost center that does not have any revenue.
Packaging Solutions Corporation
Production Department Planning Budget
For the Month Ended March 31
Budgeted labor-hours (q) ………………………..
8,000
Direct labor ($15.80q) …………………………….
$126,400
Indirect labor ($8,200 + $1.60q) ……………….
21,000
Utilities ($6,400 + $0.80q) ……………………….
12,800
Supplies ($1,100 + $0.40q) ……………………..
4,300
Equipment depreciation ($23,000 + $3.70q) ..
52,600
Factory rent ($8,400) ……………………………..
8,400
Property taxes ($2,100) …………………………..
2,100
Factory administration ($11,700 + $1.90q) ….
26,900
Total expense ……………………………………….
$254,500
2. The flexible budget appears below. Like the planning budget, this report
does not include revenue or net operating income because the
production department is a cost center that does not have any revenue.
Packaging Solutions Corporation
Production Department Flexible Budget
For the Month Ended March 31
Actual labor-hours (q) …………………………….
8,400
Direct labor ($15.80q) …………………………….
$132,720
Indirect labor ($8,200 + $1.60q) ……………….
21,640
Utilities ($6,400 + $0.80q) ……………………….
13,120
Supplies ($1,100 + $0.40q) ……………………..
4,460
Equipment depreciation ($23,000 + $3.70q) ..
54,080
Factory rent ($8,400) ……………………………..
8,400
Property taxes ($2,100) …………………………..
2,100
Factory administration ($11,700 + $1.90q) ….
27,660
Total expense ……………………………………….
$264,180