Chapter 8. Flexible Budgets, Standard Costs, and Variance Analysis

8–1 What is a static planning budget?

8–2 What is a flexible budget and how does it differ from a static planning budget?

8–5 What is a revenue variance and what does it mean?

8–6 What is a spending variance and what does it mean?

8–7 What does a flexible budget enable that a simple comparison of the planning budget to actual results does not do?

8–9 What is a quantity standard? What is a price standard?

8–10 Why are separate price and quantity variances computed?

8–11 Who is generally responsible for the materials price variance? The materials quantity variance? The labor efficiency variance?

8–12 The materials price variance can be computed at what two different points in time? Which point is better? Why?

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $148,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $48,000. The press also requires an initial investment in spare parts inventory of $21,000, along with an additional $3,150 in inventory for each succeeding year of the project. The shop’s tax rate is 21 percent and its discount rate is 8 percent. (MACRS schedule) Calculate the NPV of this project.

MACRS schedule

2. Blood pressure is independent of the blood group. We want to know, if the distributions attending to the blood group, in three referred samples attending to the type of blood pressure, they are distributed in the same way. To this end, a sample of 1500 subjects was collected and their blood group was determined and blood pressure was taken, classifying it as low, normal, and high. Obtaining the following results:

Use alfa at 0.05

Sally works for Nikko Enterprises and earns $990 bi-weekly. She has just received a 2% pay increase, effective this current pay period. In addition, Sally is entitled to five weeks’ vacation pay, which is paid each pay period.

Each pay, Sally also receives a group medical benefit of $40, which is shared 50/50 with her employer. She also receives an annual group term life insurance benefit of $1,250. Both plan values include applicable sales tax.

In addition, the following are other deductions from Sally’s pay, each bi-weekly period; $12 for union dues, $28 for a company loan repayment and $7 toward an employee social fund.

Assume income taxes are calculated at a combined rate of 18%.

Required:

1) Determine Sally’s Net Pay for one bi-weekly pay period, and

2) What is the amount owing to the CRA for statutory deductions (PD7A)

STAT15_3:

The weight of yellow cheese (in grams) on a family pizza is normally split with a 200g span and a standard 15g deviation.

A. What is the probability that the yellow cheese weight on a randomly selected family pizza will be between 194 grams and 209 grams?
B. What is the bottom quarter of the yellow cheese weight distribution on family pizza?
C. Family pizza consists of dough, sauce, yellow cheese and a possible addition. The gravy weight is always 100 grams. The weight of the supplement spreads evenly (continuously) in the range of 20 grams to 50 grams. The various component weights are independent.
Ziv ordered two family pizzas - one with no extra and one with extra. What is the expectation and what is the difference between the total weight of the two pizzas (without the dough)?

Erma’s Beauty Supply is considering expanding the existing store. Erma wants to lease the office space next door to her business. Erma must spend, $120,000 on equipment to expand. The equipment is expected to have a zero-salvage value and will be retired in 8 years. Erma expects to increase networking capital by $8,000 right now if she goes through with the expansion. Erma spent $12,000 last month on a survey of the area surrounding the shop to see if there was sufficient demand for a larger store. Erma estimates she will increase revenues by $110,000 per year in the new store for eight years. The direct expenses incurred to make those sales are $78,000, including rent. The lease she is considering signing is for 8 years. She will liquidate the $8,000 networking capital when the lease is complete in 8 years. Erma’s Beauty Supply pays 40.0% in taxes and has a cost of capital of 9.0%.

38. How much does Erma need to expand her business at T=0?

39. Based on this information, the project’s operating cash flow in each of the first seven years is $_______?

40. Based on this information, the project’s terminal year (year 8) total cash flow is $_______?

41. What is Erma’s NPV if she decides to expand the business?

Need step by step solutions and calculations

The following is a set of data from a sample of 11 items

X: 7 5 8 3 6 0 2 4 9 5 8

Y: 1 5 4 9 8 0 6 2 7 5 4

a. Construct a scatter plot using the sample data.

b. Calculate the mean, median variance and coefficient of variation and z-scores for X.

c. Determine the outliers.

d. Determine the quartiles of X.

e. Construct a box plot and determine the shape of X.

f. Is there a relationship between two variables X and Y? Explain.

g. What is the correlation between X and Y?

h. Approximately (Empirical Rule) how many of the data points in a bell-shaped distribution is within 1 standard deviation of the mean.

The major features of the management-union relations in the USA are found among the elements
inserted below:
1. the negotiations take place at the company level;
2. the negotiations take place at two levels - company and branch;
3. the negotiations take place at three levels - company, branch and national;
4. the negotiations have a constructive character;
5. the negotiations have an adversarial character;
6. the power of trade unions tends to remain constant;
7. the power of trade unions tends to increase;
8. The power of trade unions tends to diminish.
Which of the following combinations correctly and completely represents the main characteristics of the
relations between management and trade unions in the USA:
a. 1-4-6;
b. 2-5-8;
c. 1-4-7;
d. 1-5-8;
e. 2-4-6.

QUESTION 7 Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?

The percentage change in the quantity demanded for designer leather goods will be larger than the percentage change in the quantity demanded for a box of 50 of mailing envelopes.

The percentage change in the quantity demanded of designer leather goods will be approximately equal to the percentage change in the quantity demanded of a box of 50 mailing envelopes.

The percentage change in the quantity demanded for a box of 50 of mailing envelopes will be larger than the percentage change in the quantity demanded for designer leather goods.

The total revenue from designer leather goods will not change.

Consider the following financial information pertaining to a firm in a particular year:

1. Using this information, please calculate and report the following items:

2. Also, using only one sentence, remark on additional financing requirements (if any).