Question

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool’s monthly planning budget is based on operating 20 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

  

Boyne University Motor Pool Cost Control Report For the Month Ended March 31
	March Actual			Planning Budget			(Over) Under Budget
Miles		57,900			49,900
Autos		21			20
Gasoline	$	14,400		$	13,473		$	(927	)
Oil, minor repairs, parts		8,320			7,984			(336	)
Outside repairs		1,205			1,020			185
Insurance		1,840			1,720			(120	)
Salaries and benefits		8,610			8,610			0
Vehicle depreciation		4,431			4,220			(211	)
Total	$	38,806		$	37,027		$	(1,779	)

The planning budget was based on the following assumptions:

$0.27 per mile for gasoline.

$0.16 per mile for oil, minor repairs, and parts.

$51 per automobile per month for outside repairs.

$86 per automobile per month for insurance.

$8,610 per month for salaries and benefits.

$211 per automobile per month for depreciation.

The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool’s performance.

Required:

1. Complete the performance report for March based on a flexible budget that shows spending variances. (Round "per mile" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Please help with Planning Budget Assumptions, thank you.  

Boyne University Motor Pool Spending Variances For the Month Ended March 31 Planning Budget Assumptions Actual Results Flexible Budget Spending Variances Miles 57,900 57,900 Autos 21 21 Gasoline per mile $14,400 $1,233 F Oil, minor repairs, parts per mile 8,320 944 F Outside repairs per automobile 1,205 134 U Insurance per automobile 1,840 34 U Salaries and benefits per month 8,610 0 None Vehicle depreciation per automobile 4,431 0 None Total $38,806 $0 $2,009 F

Answer 1

Solution:

Boyne University Motor Pool
Spending Variances
For the Month Ended March 31
	Planning Budget Assumptions		Actual Results	Flexible Budget	Spending Variances
Miles			57,900	57,900
Autos			21	21
Gasoline	$0.27	per mile	$14,400	$15,633 (57900*$0.27)	$1,233	F
Oil, minor repairs, parts	$0.16	per mile	$8,320	$9,264 (57900*$0.16)	$944	F
Outside repairs	$51	per automobile	$1,205	$1,071 (21*51)	$134	U
Insurance	$86	per automobile	$1,840	$1,806 (21*86)	$34	U
Salaries and benefits	8610	per month	$8,610	$8,610	$0	None
Vehicle depreciation	211	per automobile	$4,431	$4,431 (211*21)	$0	None
Total			$38,806	$40,815	$2,009	F

Note – Flexible Budget is the budget prepared on the basis of actual activity level achieved at standard cost.

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