Static Budget versus Flexible Budget

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 813,000. However, the plant manager believes that the budget should not remain fixed for every month but should “flex” or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

b. Compare the flexible budget with the actual expenditures for the first three months.

What does this comparison suggest?

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $271,000 Utilities 16,000 Depreciation 27,000 Total $314,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent Units Produced January $296,000 73,000 February 284,000 67,000 March 270,000 60,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 314,000. However, the plant manager believes that the budget should not remain fixed for every month but should “flex” or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows: Wages per hour $17 Utility cost per direct labor hour $1 Direct labor hours per unit 0.2 Planned monthly unit production 80,000 a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. Niland Company Machining Department Budget For the Three Months Ending March 31 January February March Units of production 73,000 67,000 60,000 $ $ $ Total $ $ $ Supporting calculations: Units of production 73,000 67,000 60,000 Hours per unit x x x Total hours of production Wages per hour x $ x $ x $ Total wages $ $ $ Total hours of production Utility costs per hour x $ x $ x $ Total utilities $ $ $ b. Compare the flexible budget with the actual expenditures for the first three months. January February March Total flexible budget $ $ $ Actual cost Excess of actual cost over budget $ $ $ What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 717,000. However, the plant manager believes that the budget should not remain fixed for every month but should “flex” or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

b. Compare the flexible budget with the actual expenditures for the first three months.

What does this comparison suggest?

Static Budget versus Flexible Budget

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 665,000. However, the plant manager believes that the budget should not remain fixed for every month but should “flex” or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

b. Compare the flexible budget with the actual expenditures for the first three months.

What does this comparison suggest?

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 1,703,000. However, the plant manager believes that the budget should not remain fixed for every month but should “flex” or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

b. Compare the flexible budget with the actual expenditures for the first three months.

What does this comparison suggest?

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 63 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 $46 per course plus $7 per student. The company’s sales should average $850 per student.

The company planned to run four courses with a total of 63 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.

Prepare the company’s planning budget for September.

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

Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending

1.

By royal decree, there is only a single toothpaste manufacturer in Arlington, and the following represents his demand curve (shown below). If the ATC of producing toothpaste is constant at $16.50, then the monopolist will produce:  

Group of answer choices

A. shut down because AVC is not covered

B. 3 tubes at a total profit of $8

C. 4 tubes at a total profit of $6

D. 4 tubes at a total profit of $1.50

E. shut down because ATC is not covered

F. none of the above

2.

Monopoly is inefficient because

A. Group of answer choices production is not at minimum ATC

B. marginal revenue (MR) does not equal marginal cost (MC)

C. Price < Marginal cost

D. None of the above

E. added resources would be more valuable to society as inputs into the monopolized industry than where they are currently being used

3. (a)

Twenty-Twenty, LLC is a chartered monopoly supplier of fashion glasses frames and it produces with the following costs (shown below). What would Twenty-Twenty's output be?

Group of answer choices

A. none of the above

B. 3

C. 1

D. 0

E. 5

3(b)

Twenty-Twenty, LLC is a chartered monopoly producer of fashion glasses frames and it produces with the following demand and costs schedule (shown below). At the profit maximizing level of output, what will Twenty-Twenty's profits be? What would Twenty-Twenty's output be?

Group of answer choices

A. $11

B. $0

C. $30

D. None of the above

E. $35

3(C)

Twenty-Twenty, LLC is a monopolist producer of fashion glasses frames. It produces with the following cost and demand schedule (shown in the table below). At the profit maximizing output. the difference between Price and Marginal Cost would be: What would Twenty-Twenty's output be?

Group of answer choices

A. 2

B. $5

C.$6

D. $4.50

E. 0

F. none of the above

1. You are purchasing a special equipment for military use. The supplier reveals its cost structure as follows:

Material cost = $40 per unit

Labor hours = 10 per unit for the first unit, Labor cost = $10/hour

List the material and labor cost and labor + material cost for the first 8 units when the supplier utilizes a learning curve of 85%.

PLEASE PROVIDE THE FORMULA SO I ACTUALLY KNOW HOW TO DO THIS STUFF.

1. 4. Prepare a Budget that estimates direct labor hours and related costs needed to support budgeted production.direct labor cost budget for January.

   Birds of a Feather Inc. Direct Labor Cost Budget For the Month Ending January 31
   			Fabrication Department		Assembly Department	Total
   Hours required for production:
   	Birdhouse
   	Bird feeder
   	Total
   Hourly rate			$		$
   Total direct labor cost			$		$	$

   5. Prepare a Budget that estimates the cost for each item of factory overhead needed to support budgeted production.factory overhead cost budget for January.

   Birds of a Feather Inc. Factory Overhead Cost Budget For the Month Ending January 31
   	Indirect factory wages
   	Depreciation of plant and equipment
   	Power and light
   	Insurance and property tax
   	Total	$

   6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $29,000, and work in process at the end of January is estimated to be $35,400.

   Birds of a Feather Inc. Cost of Goods Sold Budget For the Month Ending January 31
   Direct materials inventory, January 1 Direct materials inventory, January 31 Direct materials purchases Factory Overhead Finished goods inventory, January 1 Finished goods inventory, January 31
   Direct materials inventory, January 1 Direct materials inventory, January 31 Direct materials purchases Factory Overhead Work in process inventory, January 1 Work in process inventory, January 31
   Direct materials:
   Direct materials inventory, January 1 Direct materials inventory, January 31 Finished goods inventory, January 1 Finished goods inventory, January 31 Work in process inventory, January 1 Work in process inventory, January 31
   Direct labor Direct materials purchases Factory overhead Finished goods inventory, January 31 Work in process inventory, January 1 Work in process inventory, January 31
   Cost of direct materials available for use
   Less: Direct materials inventory, January 1 Less: Direct materials inventory, January 31 Less: Finished goods inventory, January 1 Less: Finished goods inventory, January 31 Less: Work in process inventory, January 1 Less: Work in process inventory, January 31
   Cost of direct materials placed in production
   Direct labor Direct materials purchases Finished goods inventory, January 1 Finished goods inventory, January 31 Work in process inventory, January 1 Work in process inventory, January 31
   Direct materials purchases Factory overhead Finished goods inventory, January 1 Finished goods inventory, January 31 Work in process inventory, January 1 Work in process inventory, January 31
   Total manufacturing costs
   Total work in process during the period
   Less: Direct materials inventory, January 1 Less: Direct materials inventory, January 31 Less: Finished goods inventory, January 1 Less: Finished goods inventory, January 31 Less: Work in process inventory, January 1 Less: Work in process inventory, January 31
   Cost of goods manufactured
   Cost of finished goods available for sale
   Less: Direct materials inventory, January 1 Less: Direct materials inventory, January 31 Less: Finished goods inventory, January 1 Less: Finished goods inventory, January 31 Less: Work in process inventory, January 1 Less: Work in process inventory, January 31
   Cost of goods sold			$

   7. Prepare a selling and administrative expenses budget for January.

   Birds of a Feather Inc. Selling and Administrative Expenses Budget For the Month Ending January 31
   Selling expenses:
   	Sales salaries expense
   	Advertising expense
   	Telephone expense—selling
   	Travel expense—selling
   	Total selling expenses
   Administrative expenses:
   	Office salaries expense
   	Depreciation expense—office equipment
   	Telephone expense—administrative
   	Office supplies expense
   	Miscellaneous administrative expense
   	Total administrative expenses
   Total operating expenses			$

   8. Prepare a budgeted income statement for January.

   Birds of a Feather Inc. Budgeted Income Statement For the Month Ending January 31
   Gross profit Income before income tax Interest expense Interest revenue Revenue from sales
   Administrative expenses Cost of goods sold Income tax expense Interest expense Selling expenses
   Gross profit Interest revenue Net income Net loss Revenue from sales
   Selling and administrative expenses:
   	Cost of goods sold Income tax expense Interest expense Net loss Selling expenses
   	Administrative expenses Gross profit Income tax expense Interest expense Interest revenue
   	Total selling and administrative expenses
   Income from operations Loss from operations
   Other revenue:
   	Gross profit Interest revenue Interest expense Net income Revenue from sales
   Other expenses:
   	Cost of goods sold Income tax expense Interest expense Net loss Selling expenses
   Income before income tax Loss before income tax
   Cost of goods sold Income tax (30% rate) Interest expense
   Gross profit Net loss Net income			$

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