In: Accounting
Question For Managerial accounting class: All the information is below
Formula |
|
Revenue |
$70 Q |
Expenses: |
|
Cost of merchandises |
$30 Q |
Wages and salaries |
$130,000 |
Utilities |
$12,000 + $2Q |
Miscellaneous |
$5000 + $3 Q |
1. Prepare the company’s planning budget assuming that 30,000 pairs of shoes are expected to be sold. (1pt)
2. Assume that 25,000 pairs of shoes were actually sold. Prepare a flexible budget for this level of activity. (1pt)
3. The actual results appear below. Prepare a performance report for the company.(1pt)
Revenue |
$1,800,000 |
Purchases |
$760,000 |
Wages and salaries |
$135,000 |
Utilities |
$65,000 |
Miscellaneous |
$87,000 |
Ans. 1 | Planning Budget | |||||||
Pairs of shoes | 30000 | |||||||
Revenue | $2,100,000 | |||||||
Expenses: | ||||||||
Cost of merchandise | $900,000 | |||||||
Wages and salaries | $130,000 | |||||||
Utilities | $72,000 | |||||||
Miscellaneous | $95,000 | |||||||
Total expenses | $1,197,000 | |||||||
Net operating income | $903,000 | |||||||
Ans. 2 | Flexible Budget | |||||||
Pairs of shoes | 25000 | |||||||
Revenue | $1,750,000 | |||||||
Expenses: | ||||||||
Cost of merchandise | $750,000 | |||||||
Wages and salaries | $130,000 | |||||||
Utilities | $62,000 | |||||||
Miscellaneous | $80,000 | |||||||
Total expenses | $1,022,000 | |||||||
Net operating income | $728,000 | |||||||
Ans. 3 | Flexible Budget Performance Report | |||||||
Actual Results | Spending variance | Flexible Budget | Activity variance | Planning Budget | ||||
Pairs of shoes | 25000 | 25000 | 30000 | |||||
Revenue | $1,800,000 | $50,000 | F | $1,750,000 | $350,000 | U | $2,100,000 | |
Expenses: | ||||||||
Cost of merchandise | $760,000 | $10,000 | U | $750,000 | $150,000 | F | $900,000 | |
Wages and salaries | $135,000 | $5,000 | U | $130,000 | $0 | none | $130,000 | |
Utilities | $65,000 | $3,000 | U | $62,000 | $10,000 | F | $72,000 | |
Miscellaneous | $87,000 | $7,000 | U | $80,000 | $15,000 | F | $95,000 | |
Total expenses | $1,047,000 | $25,000 | U | $1,022,000 | $175,000 | F | $1,197,000 | |
Net operating income | $753,000 | $25,000 | F | $728,000 | $175,000 | U | $903,000 | |
*WORKING NOTES : | ||||||||
*Calculation of Flexible & Planning budget: | ||||||||
Flexible Budget | Planning Budget | |||||||
Pairs of shoes | 25,000 | 30,000 |
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