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Solutions Manual, Chapter 9 11
Exercise 9-1 (10 minutes)
Pu
g
et Sound Divers
Flexible Budget
For the Month Ended May 31
A
ctual divin
g
-hours ………………………………. 105
Revenue ($365.00q) …………………………….. $38,325
Expenses:
Wa
g
es and salaries ($8,000 + $125.00q) .. 21,125
T
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12 Managerial Accounting, 16th Edition
Exercise 9-2 (15 minutes)
1. The activity variances are shown below:
Fli
g
ht 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
Wa
g
es and salaries ($5,200 +
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
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Solutions Manual, Chapter 9 13
Exercise 9-3 (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:
Packin
g
supplies ($0.50q) ….….. 4,200 4,000 200 U
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14 Managerial Accounting, 13th Edition
Exercise 9-4 (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
Fli
g
hts (q) ………………………………. 48 48 50
Revenue ($320.00q) …………………. $13,650 $1,710 U $15,360 $640 U $16,000
Expenses:
Wa
g
es and salaries ($4,000 +
$82.00q) ……………………………. 8,430 494 U 7,936 164 F 8,100
2. The overall $336 unfavorable activity variance is due to activity falling below what had been planned
for the month. The $1,710 unfavorable revenue variance is very large relative to the company’s net
operating income and should be investigated. Was this due to discounts given or perhaps a lower
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Solutions Manual, Chapter 9 15
Exercise 9-5 (15 minutes)
A
lyeski Tours
Flexible Budget
For the Month Ended July 31
Bud
g
eted
A
ctual cruises (q1) ………………………………………. 24
Bud
g
eted
A
ctual passen
g
ers (q2)…………………………………. 1,400
Revenue ($25.00q2) …………………………………………………. $35,000
Expenses:
A
A
T
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16 Managerial Accounting, 16th Edition
Exercise 9-6 (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.
The planning budget is based on 100 jobs, but the actual results are for
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
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Solutions Manual, Chapter 9 17
Exercise 9-7 (15 minutes)
The adjusted budget was created by multiplying each item in the budget
by the ratio 105/100; in other words, each item was adjusted upward by
5%. This procedure provides valid benchmarks for revenues and for costs
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
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18 Managerial Accounting, 16th Edition
Exercise 9-8 (20 minutes)
Jake’s Roof Repair
Activity Variances
For the Month Ended May 31
Flexible
Budget
Planning
Budget
Activity
Variances
Repair-hours (q) ……………………. 2,900 2,800
Revenue ($44.50q) ………………… $129,050 $124,600 $4,450 F
Expenses:
Wa
g
es 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
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Solutions Manual, Chapter 9 19
Exercise 9-9 (10 minutes)
Wyckam Manufacturin
g
Inc.
Planning Budget for Manufacturing Costs
For the Month Ended June 30
Bud
g
eted machine-hours (q)…….. 5,000
Direct materials ($4.25q) …………. $21,250
Direct labor ($36,800) …………….. 36,800
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20 Managerial Accounting, 16th Edition
Exercise 9-10 (15 minutes)
Lava
g
e Rapide
Planning Budget
For the Month Ended August 31
Bud
g
eted cars washed (q) ………………………. 9,000
Revenue ($4.90q) …………………………………. $44,100
Expenses:
Cleanin
g
supplies ($0.80q) ……………………. 7,200
Electricity ($1,200 + $0.15q) …………………. 2,550