Question

Big Daddy Ltd. is a company that manufactures an abdominal exerciser called The DadBod Toner. The following information is for three of the company's activities in 2018:

                                                                                        Rate per Output unit/Batch

                                                                      Static                                             Actual

  Activity               Activity Level      Cost Driver                Budget             Cost

Manufacturing       Output unit    Machine hours               $1.10             $1.20

Inspecting                     Batch          Inspection hours          $14.00             12.50

Packaging                      Batch          Packaging hours            $5.75             $5.40

The output measure is the number of units produced.

                                                                                                       Static          Actual

                                                                                                     Budget        Amount

Number of units produced                                                   48,000           49,200

Number of machine hours                                                    12,000           12,300

Batch size in terms of units produced:

        Inspection                                                                                  4                     3

        Packaging                                                                                15                   16

Required:

a.     Calculate the flexible-budget variance for each activity in 2018.

b.     Calculate the price and efficiency variances for each activity in 2018.

2, Tripp Company sells three products with the following seasonal sales pattern:

                                         Products

  Quarter            X                Y                Z

       1                  40%         30%          10%

       2                  30%          20%          40%

       3                  20%          20%          40%

       4                  10%          30%          10%

The annual sales budget shows forecasts for the different products and their expected selling price per unit as follows:

Product           Units          Selling Price

      X                 40,000                  $ 3

      Y                 100,000              $12

      Z                 50,000                  $ 5

Required:

Prepare a revenue budget in dollars for each quarter. Present each quarter in a separate column and add a column to show total year sales.

Answer 1

Answer :

(1)

(a)

-	Flexible budget	Actual	Variance	Favorable / Unfavorable
Number of units produce	49200	49200	-	-
Variable cost	-	-	-	-
Manufacturing cost	13530	14760	1230	Unfavorable
Inspection cost	172200	205000	32800	Unfavorable
Packaging cost	18860	16605	2255	Favorable
-	204590	236365	-	-

(b).

Price variance manufacturing cost = (1.1 - 1.2)*12300 = 1230 U

Efficiency variance manufacturig cost = (12300 - 12300)*1.1 = 0 No variance

Price variance inspection cost = (14 - 12.50)*16400 = 24600 F

Efficiency variance inspecition cost = (12300 - 16400)*14 = 57400 U

Price variace packaging cost = (5.75 - 5.40)*3075 = 1076.25 F

Price variance packaging = (3280 - 3075)*5.75 = 1178.75 F

Working note :

-	Flexible	Actual
Machine hours	12300 (12000/48000)*49200	12300
Inspection hours	12300 (49200/4)	16400 (49200/3)
Packaging	3280 (49200/15)	3075 (49200/16)

(2).

Tripp Company

Revenue Budget (Quarterly)

-	First Quarter	Second Quarter	Third Quarter	Forth Quarter	Total
Product X	-	-	-	-	-
Sales Unit	16000 units [40000*40%]	12000 units [40000*30%]	8000 units [40000*20%]	4000 units [40000*10%]	40000 units
Selling price unit	$3	$3	$3	$3	-
Sales ($)	$48000 [16000 units*$3]	$36000 [12000 units*$3	$24000 [8000 units*$3]	$12000 [4000 units*$3]	$120000
Product Y	-	-	-	-	-
Sales (Units)	30000 units [100000*30%]	20000 units [100000*20%]	20000 units [100000*20%]	30000 units [100000*30%]	100000 units
Selling price	$12	$12	$12	$12	-
Sales ($)	$360000 [30000 units*$12]	$240000 [20000 units*$12]	$240000 [20000 units*$12]	$360000 [30000 units*$12]	$1200000
Product Z	-	-	-	-	-
Sales (units)	5000 units [50000*10%]	20000 units [50000*40%]	20000 units [50000*40%]	5000 units [50000*10%]	50000 units
Selling price per unit	$5	$5	$5	$5	-
Sales ($)	$25000 [5000 units*$5]	$100000 [20000 units*$5]	$100000 [20000 units*$5]	$25000 [5000 units*$5]	$250000
Total	$433000	$376000	$364000	$397000	$1570000