Accounting Chapter 9 Homework Note that the report does not include revenue or net operating income because

Exercise 9-10 (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) ..

Total expense …………………………………………

Net operating income …………………………..….

Exercise 9-11 (20 minutes)

Lavage Rapide

Activity Variances

For the Month Ended August 31

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

7,640

7,700

60

F

Rent ($8,000) …………………………..

8,000

F

Total expense ……………………………..

F

Net operating income …………………..

U

Exercise 9-12 (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

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

8,500

7,640

860

U

Depreciation ($6,000) ……………

6,000

Rent ($8,000) ………………………

8,000

($4,000 + $0.10q) ………………

U

Total expense …………………………

U

Net operating income ………………

U

Exercise 9-13 (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

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

8,500

860

U

7,640

60

F

Depreciation ($6,000) ……………………

6,000

Rent ($8,000) ………………………………

8,000

U

F

Total expense …………………………………

U

F

Net operating income ………………………

U

$ 5,280

U

Exercise 9-14 (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) ……………………..

Equipment depreciation ($23,000 + $3.70q) .

52,600

Factory rent ($8,400) ……………………………..

8,400

Property taxes ($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

Supplies ($1,100 + $0.40q) ……………………..

Equipment depreciation ($23,000 + $3.70q) .

54,080

Factory rent ($8,400) ……………………………..

8,400

Property taxes ($2,100) ………………………….

Factory administration ($11,700 + $1.90q) …

27,660

Total expense ……………………………………….

$264,180

Exercise 9-14 (continued)

3. The flexible budget performance report appears below. 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 Performance Report

For the Month Ended March 31

Actual

Results

Spending

Variances

Flexible

Budget

Activity

Variances

Planning

Budget

Labor-hours (q) ………………………….

8,400

8,000

Direct labor ($15.80q) ………………….

$134,730

$2,010

U

$132,720

$6,320

U

$126,400

Indirect labor ($8,200 + $1.60q) ……

19,860

1,780

F

21,640

640

U

21,000

Utilities ($6,400 + $0.80q) ……………

14,570

1,450

U

13,120

320

U

12,800

Supplies ($1,100 + $0.40q) …………..

4,980

520

U

4,460

160

U

4,300

54,080

1,480

U

52,600

Factory rent ($8,400) …………………..

8,700

300

U

8,400

Property taxes ($2,100) ……………….

F

U

26,900

Total expense …………………………….

U

Exercise 9-14 (continued)

4. The overall unfavorable activity variance of $9,680 occurred because the

actual level of activity exceeded the budgeted level of activity. The

production manager certainly should not be held responsible for this

Exercise 9-15 (20 minutes)

Via Gelato

Revenue and Spending Variances

For the Month Ended June 30

Actual

Results

Flexible

Budget

Revenue and

Spending

Variances

Liters (q) …………………………..…..

6,200

Revenue ($12.00q) …………………..

$71,540

$74,400

$2,860

U

Expenses:

Raw materials ($4.65q) …………..

29,230

28,830

400

U

Wages ($5,600 + $1.40q) ……….

F

Utilities ($1,630 + $0.20q) ………

U

Rent ($2,600) ……………………….

2,600

Insurance ($1,350) ………………..

Miscellaneous ($650 + $0.35q) …

F

Total expense …………………………

150

U

Net operating income ……………….

$18,640

$21,650

$3,010

U

Exercise 9-16 (30 minutes)

AirQual Test Corporation

Flexible Budget Performance Report

For the Month Ended February 28

Actual

Results

Revenue

and

Spending

Variances

Flexible

Budget

Activity

Variances

Planning

Budget

Jobs (q) ………………………………………..

52

50

Revenue ($360.00q) ………………………..

$18,950

$230

F

$18,720

$720

F

$18,000

Expenses:

Technician wages ($6,400) ……………..

6,450

50

U

6,400

0

6,400

Mobile lab operating expenses

($2,900 + $35.00q) …………………….

4,530

190

F

4,720

70

U

4,650

Office expenses ($2,600 + $2.00q) …..

U

2,704

4

U

Insurance ($1,680) ……………………….

1,680

0

1,680

0

1,680

F

U

Total expense …………………………………

U

Net operating income ………………………

F

Problem 9-17 (45 minutes)

The completed flexible budget performance report is as follows:

Ray Company

Production Department Flexible Budget Performance Report

For the Month Ended August 31

Actual

Results

Spending

Variances

Flexible

Budget

Activity

Variances

Planning

Budget

Labor-hours (q) ………………………….

9,480

9,000

Direct labor ($14q) ……………………..

$134,730

$2,010

U

$132,720

$6,720

U

$126,000

Indirect labor ($7,420 + $1.50q) ……

F

U

Utilities ($6,500 + $0.70q) ……………

U

Supplies ($1,600 + $0.30q) …………..

U

Equipment depreciation ($78,400) ….

F

U

35,800

Total expense …………………………….

U

Problem 9-17 (continued)

Direct labor

:

Cost formula: $132,720 ÷ 9,480 labor-hours = $14

Spending variance: $134,730 ‒ $132,720 = $2,010 U

Planning budget: 9,000 labor-hours × $14 per labor-hour = $126,000

Activity variance: $132,720 ‒ $126,000 = $6,720 U

Supplies

:

Variable portion of cost formula: $4,444 ‒ $4,300 = $144; $144 ÷ (9,480 ‒

9,000) = $0.30

Fixed portion of cost formula: $4,300 ‒ (9,000 labor-hours × $0.30) =

$1,600

Spending variance: $4,940 ‒ $4,444 = $496 U

Activity variance: $4,444 ‒ $4,300 = $144 U

Problem 9-17 (continued)

Factory administration

:

Actual results: $288,088 ‒ ($134,730 + $19,860 + $14,586 + $4,940 +

$78,400) = $35,572

Spending variance: $35,572 ‒ $36,712 = $1,140 F

Problem 9-18 (30 minutes)

1. The activity variances are shown below:

FAB Corporation

Activity Variances

For the Month Ended March 31

Flexible

Budget

Planning

Budget

Activity

Variances

Machine-hours (q) ……………………..

26,000

30,000

Utilities ($20,600 + $0.10q) …………

$ 23,200

$ 23,600

$ 400

F

Maintenance ($40,000 + $1.60q) ….

81,600

88,000

F

Supplies ($0.30q) ………………………

F

Indirect labor ($130,000 + $0.70q) .

F

Depreciation ($70,000) ……………….

Total ………………………………………

F

Problem 9-18 (continued)

2. The spending variances are computed below:

FAB Corporation

Spending Variances

For the Month Ended March 31

Actual

Results

Flexible

Budget

Spending

Variances

Machine-hours (q) ……………………..

26,000

Utilities ($20,600 + $0.10q) …………

$ 24,200

$ 23,200

$1,000

U

Maintenance ($40,000 + $1.60q) ….

78,100

81,600

F

Supplies ($0.30q) ………………………

U

Indirect labor ($130,000 + $0.70q) .

U

Depreciation ($70,000) ……………….

1,500

U

Total ………………………………………

U

An unfavorable spending variance means that the actual cost was

greater than what the cost should have been for the actual level of

activity. A favorable spending variance means that the actual cost was

less than what the cost should have been for the actual level of activity.