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Solutions Manual, Chapter 9 1
Chapter 9
Flexible Budgets and Performance Analysis
Solutions to Questions
9-3 Actual results can differ from the budget
for many reasons. Very broadly speaking, the
activity can have a very big impact on costs.
From a manager’s perspective, a variance that is
due to a change in activity is very different from
a variance that is due to changes in prices and
9-5 An activity variance is the difference
between a revenue or cost item in the flexible
budget and the same item in the static planning
9-6 A revenue variance is the difference
between the actual revenue for the period and
how much the revenue should have been, given
9-7 A spending variance is the difference
between the actual amount of the cost and how
much a cost should have been, given the actual
9-8 In a flexible budget performance report,
the actual results are not directly compared to
the static planning budget. The flexible budget is
interposed between the actual results and the
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2 Managerial Accounting, 16th Edition
budget are the revenue and spending variances.
The flexible budget performance report cleanly
separates the differences between the actual
9-9 The only difference between a flexible
budget based on a single cost driver and one
9-10 When actual results are directly
compared to the static planning budget, it is
implicitly assumed that costs (and revenues)
adjusted proportionately for a change in activity
and then directly compared to actual results, it
is implicitly assumed that costs should change in
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Solutions Manual, Chapter 9 3
Chapter 9: Applying Excel
The completed worksheet is shown below.
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4 Managerial Accounting, 16th Edition
Chapter 9: Applying Excel (continued)
The completed worksheet, with formulas displayed, is shown below.
Note: The formulas to compute whether a variance is Favorable or
Unfavorable use the IF() function. For example, in cell D31, the formula is
=IF(E31>B31,”U”,IF(E31<B31,”F”,””)). This formula first checks whether
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Solutions Manual, Chapter 9 5
Chapter 9: Applying Excel (continued)
1. With the changes in data, the result is:
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6 Managerial Accounting, 16th Edition
Chapter 9: Applying Excel (continued)
a. The activity variance for revenue is $1,600 U. This variance is the
difference between the revenue under the planning budget and under
b. The spending variance for the cost of ingredients is $60 U. This
variance is the difference between what the cost should have been
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Solutions Manual, Chapter 9 7
Chapter 9: Applying Excel (continued)
2. With the revised data, the worksheet should look like this:
Actual activity exceeded planned activity by 100 meals served, which
should have boosted net operating income by $925. However, actual
results were not this favorable. Given the actual number of meals
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8 Managerial Accounting, 16th Edition
The Foundational 15
1. The amount of revenue in the flexible budget for May is:
Revenue:
2. The amount of employee salaries and wages in the flexible budget for
May is:
Employee salaries and wages:
3. The amount of travel expenses in the flexible budget for May is:
Travel expenses:
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 wa
g
es……………. $88,500
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Solutions Manual, Chapter 9 9
The Foundational 15
6. The revenue variance for May is:
A
ctual results Revenue Variance Flexible Bud
g
et
7. The employee salaries and wages spending variance for May is:
A
ctual results Spendin
g
Variance Flexible Bud
g
et
8. The travel expenses spending variance for May is:
A
ctual results Spendin
g
Variance Flexible Bud
g
et
9. The other expenses spending variance for May is:
A
ctual results Spendin
g
Variance Flexible Bud
g
et
10. The amount of revenue in the planning budget for May is:
Revenue:
Variable element per customer served (a) …… $5,000
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
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10 Managerial Accounting, 16th Edition
The Foundational 15
12. The amount of travel expenses in the planning budget for May is:
Travel expenses:
13. The amount of Other Expenses included in the planning budget for
14. The activity variance for revenue for May is:
Flexible Bud
g
et
A
ctivity Variance Plannin
g
Bud
g
et
15. The activity variances for the expenses for May are as follows:
Flexible
Budget
A
ctivity
Variance
Plannin
g
Budget
T