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 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,700 per month plus $45 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 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.

Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 30 percent of sales collected in the month of sale and 70 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

• Badlands maintains a minimum cash balance of $14,000. Total payments in January 20x1 are budgeted at $220,000.
• A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

  	Cash Receipts
  	January			February
  From December 31 accounts receivable	$	112,000
  From January sales		94,000		$	150,000
  From February sales					65,400

• March 20x1 sales are expected to total 5,000 units.
• Finished-goods inventories are maintained at 30 percent of the following month’s sales.
• The December 31, 20x0, balance sheet revealed the following selected figures: cash, $24,300; accounts receivable, $112,000; and finished goods, $25,050.

1. Determine the number of units that Badlands sold in December 20x0.

2. Compute the sales revenue for March 20x1.

3. Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

4. Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

5. Calculate the number of units in the December 31, 20x0, finished-goods inventory.

6. Calculate the number of units of finished goods to be manufactured in January 20x1.

7. Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

The Moto Hotel opened for business on May 1, 2017. Here is its trial balance before adjustment on May 31.

Other data:

(a) Prepare a ledger using T-accounts. Enter the trial balance amounts and post the

adjusting entries.

(b) Prepare an adjusted trial balance on May 31.

(c) Prepare an income statement and a retained earnings statement for the month of May

and a classified balance sheet at May 31.

(d) Identify which accounts should be closed on May 31.

An electronics distributor sells a technology product with a very short lifecycle. The distributor orders the product from the manufacturer before observing demand and, due to the length of the supply chain, is unable to order more within the product life cycle. The manufacturer builds the product to order at a cost of $50 per unit and sells it to the distributor for $95 per unit. The distributor sells the product to its customers for $180 per unit. Demand for the product during its life cycle is expected to be normally distributed with a mean of 8,000 units and a standard deviation of 3,500. Any units left over at the end of life cannot be sold. In fact, due to hazardous materials used in the product, a fee of $5 per unit must be paid to properly dispose of any leftover units.

a. Using the single period (aka news vendor) model, what order quantity would maximize expected profit for the distributor? (Hint: think about what the price and cost would be from the distributor’s perspective.)

b. What order quantity would maximize expected profit for the supply chain (manufacturer plus distributor, i.e., the “globally optimal” order quantity)? (Hint: think about what the price and cost are for the overall supply chain.)

c. Suppose the manufacturer offers to reduce the price it charges the distributor to $55 in return for 15% of the distributor’s revenue from sales of the product. Explain why this type of revenue sharing contract is beneficial for the supply chain

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.40 Electricity $ 1,300 $ 0.07 Maintenance $ 0.15 Wages and salaries $ 4,300 $ 0.20 Depreciation $ 8,100 Rent $ 1,800 Administrative expenses $ 1,600 $ 0.03 For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.20 per car washed. The actual operating results for August appear below.

he actual operating results for August appear below.

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (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.)

An electronics distributor sells a technology product with a very short lifecycle. The distributor orders the product from the manufacturer before observing demand and, due to the length of the supply chain, is unable to order more within the product life cycle. The manufacturer builds the product to order at a cost of $50 per unit and sells it to the distributor for $95 per unit. The distributor sells the product to its customers for $180 per unit. Demand for the product during its life cycle is expected to be normally distributed with a mean of 8,000 units and a standard deviation of 3,500. Any units left over at the end of life cannot be sold. In fact, due to hazardous materials used in the product, a fee of $5 per unit must be paid to properly dispose of any leftover units.

a. Using the single period (aka news vendor) model, what order quantity would maximize expected profit for the distributor? (Hint: think about what the price and cost would be from the distributor’s perspective.)

b. What order quantity would maximize expected profit for the supply chain (manufacturer plus distributor, i.e., the “globally optimal” order quantity)? (Hint: think about what the price and cost are for the overall supply chain.)

c. Suppose the manufacturer offers to reduce the price it charges the distributor to $55 in return for 15% of the distributor’s revenue from sales of the product. Explain why this type of revenue sharing contract is beneficial for the supply chain

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: Fixed Cost per Month Cost per Pizza Cost per Delivery Pizza ingredients $ 4.60 Kitchen staff $ 6,170 Utilities $ 740 $ 0.60 Delivery person $ 3.40 Delivery vehicle $ 760 $ 1.60 Equipment depreciation $ 504 Rent $ 2,130 Miscellaneous $ 860 $ 0.20 In November, the pizzeria budgeted for 1,950 pizzas at an average selling price of $20 per pizza and for 190 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 2,050 Deliveries 170 Revenue $ 41,680 Pizza ingredients $ 9,550 Kitchen staff $ 6,110 Utilities $ 950 Delivery person $ 578 Delivery vehicle $ 1,012 Equipment depreciation $ 504 Rent $ 2,130 Miscellaneous $ 868 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.)

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 $42 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 60 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.

Problem 4-34 Multiple Products, Break-Even Analysis, Operating Leverage Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30, and desk lamps sell for $20. The projected income statement for the coming year follows: Check figures: 2. $277,778 4. Break-even revenue = $294,118 OBJECTIVE 0 0 Sales Less: Variable costs Contribution margin Less: Fixed costs Operatingincome $600 ,000 400,000 200,000 150,000 $ 50,000 The owner of Carlyle estimates that 60 percent of the sales revenues will be produced by floor lamps and the remaining 40 percent by desk lamps. Floor lamps are also responsible for 60 per- cent of the variable expenses. Of the fixed expenses, one-third are common to both products, and one-half are directly traceable to the floor lamp product line. Required: I. Compute the sales revenue that must be earned for Carlyle to break even. 2. Compute the number of floor lamps and desk lamps that must be sold for Carlyle to break even . 3. Compute the degree of operating leverage for Carlyle Lighting Products. Now assume that the actual revenues will be 40 percent higher than the projected revenues. By what percentage will profits increase with this change in sales volume? 4. CONCEPTUAL CONNECTION What is the theory behind the operating leverage concept?