The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 64 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,900 per month plus $44 per course plus $5 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 65 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,800 per month plus $41 per course plus $5 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 55 students. The actual operating results for September appear below:

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 64 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,600 per month plus $44 per course plus $6 per student. The company’s sales should average $900 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

2. Variance Analysis

Nail_It company is a manufacturer of a custom engraved hammers. For the year 2021, the weekly budget was as follows.

• Sales revenue $64,000: 2,000 hammers × price $32
• Variable costs:
  • Direct materials $10,000: 2,000 hammers × 1 lbs per hammer × price $5/lb
  • Direct labour $50,000: 2,000 hammers × 5 hour per hammer × rate $5/hour
  • no variable overhead
• Fixed costs: $3,000
• Profit: $1,000

The actual performance of the week was as follows.

• Sales revenue $70,400: 2,200 hammers × price $32
• Variable costs:
  • Direct materials $13,200: 2,200 hammers × 1 lbs per hammer × price $6/lb
  • Direct labour $46,200: 2,200 hammers × 3 hour per hammer × rate $7/hour
  • no variable overhead
• Fixed costs: $8,000
• Profit: $8,000

Required:

1) Compute the following variances

a) Spending and Volume Variances of Materials

b) Spending and Volume Variances of Labour

c) Spending and Volume Variances of Fixed Overhead

d) Materials Quantity Variance

e) Materials Price Variance

f) Labour Efficiency Variance

g) Labour Rate Variance

2) Nail_It company hired an experienced engineer and asked her to re-organize the production process. How could hiring an experienced engineer and their new production process explain the variances? Please comment on individual components of variances, their relations to other variances, and overall impact on profitability.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 65 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,500 per month plus $45 per course plus $3 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 55 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

Requirements: Provide a short answer to each independent scenario.

Jiminy Corp. enters into a sales contract. The contract specifies only one performance obligation. Jiminy completes the performance obligation by delivering the promised goods. As specified in the sale contract, Jiminy will receive $50,000 for satisfaction of the performance obligation, which will be paid in monthly installments over the three-year period upon delivery. Assume that Jiminy expects to receive the full contract price from the customer. Will Jiminy have recognized more than, less than, or exactly $50,000 of sales revenue related to the contract? Why?

Monstro Corp. accepts $1,000 of goods on consignment from Donkey Corp. Donkey sells them for $1,500, charging a commission of 10% of sale price. Monstro has not received the cash yet. Provide the journal entries, if necessary, of the transfer and sale for both corporations.

On August 1^st, Blue Fairy Inc. enters into a contract with Gideon Video to add their programs to Blue Fairy's network. Gideon will pay Blue Fairy an upfront fee of $250,000 fixed fee for 12 months of access, and will also pay a $100,000 bonus if Agee's users access Gideon Video for at least 10,000 hours during the 12 month period. Blue Fairy estimates that it has a 70% chance of earning the $100,000 bonus. Using the expected value approach, how much revenue will Blue Fairy recognize assuming fiscal year end of December 31^st.

Question 5 (Total of 24 marks)

Hit-and-Miss Airlines are considering providing a new daily service between two cities. The aircraft has a maximum capacity of 200 passengers and each flight incurs a fixed cost of $27,000 regardless of the number of passangers. In addition, a cost is also incurred of $75 per passanger to cover such things as catering, booking, baggage handling.

The company is thinking of charging $225 per ticket. How many passengers will the airline need on each flight to break even? Find the break-even point algebraically and illustrate it using an EXCEL graph. Attach the printout or copy your EXCEL graph into your assignment submission. Based on your analysis, will Hit-and-Miss realize a profit or a loss if 160 seats are sold for a particular flight? Explain briefly.

EXCEL Instructions: Create a column called Number of Passengers and in that column enter values from 0 to 200 in increments of 20. Then create two more columns, one for Total Cost and another for Total Revenue. Enter appropriate formulae in EXCEL to obtain the total cost and total revenue corresponding to each value in the Number of Passengers column. Highlight the resulting three sets of numbers and go to the Chart Wizard to obtain the graph. Make sure that your graph has been labelled appropriately (i.e. title, axis labels, legend). Please refer to Topic 3 in the EXCEL Booklet for further instructions on entering formulae and graphing in EXCEL.

On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $240,000. The Cortland bonds have a stated interest rate of 7%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

Required:
1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.
2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.
3. Prepare all appropriate journal entries related to the bond investment during 2021, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.

Journal entry worksheet

1. Record the closing of the revenue account to the income summary.

2. Record the closing of the expenses accounts to the income summary

3. Record the closing of the income summar to retained earnings.

4. Close the cash dividends account assuming Retained Earnings was not debited directly when dividends were declared.

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)