Accounting Question

This assessment addresses the following course objective(s):

CO2 – Calculate various materials, overhead, and pricing.

BU 660
Mod 3, Ch 6-8
PT templates
P 6-38
Spin Cycle Company
Income Statement for 2020
(in thousands)
Revenues
Equipment
Maintenance contracts
Total revenues
$12,000
4,000
$16,000
$10,000
$6,000
Cost of goods sold
Gross margin
Operating costs:
Marketing costs
Distribution costs
Customer maintenance costs
Administrative costs
Total operating costs
800
200
300
900
2,200
3,800
Operating income
Part 1
Spin Cycle Company
Income Statement for 2021
(in thousands)
Note: The increases are shown in the yellow boxes.
For example, the 10% increase in equipt. units sold is show
The increase in equipt. prices of 15% is shown in cell E34 a
Revenues
units
Equipment
Maintenance contracts
Total revenues
Cost of goods sold
Gross margin
Operating costs:
1.1
Marketing costs )
Distribution costs
Customer maintenance costs
Administrative costs
Total operating costs
Operating income
prices
1.1
1.15
1.1
200
1.1
60
15180
4400
19580
11880
7700
1.08
1000
220
360
900
2480
5220
Part 2
The budget aligns with Spin Cycle’s key strategy of customer satisfaction.
by hiring maintenance technicians and increasing costs of customer maintenance
by 20.0% ($60,000 ÷ $300,000) more than the 10% forecasted increase in sales.
Part 3
Preparing a budget helps Spin Cycle manage costs based on revenues and production
needs, look for opportunities to increase efficiencies, reduce costs, particularly in areas where
costs are high, coordinate and communicate across different parts of the organization, create a
framework for judging performance and facilitating learning, and motivate managers and
employees to achieve “stretch” targets of higher revenues and lower costs.
equipt. units sold is shown im cell D34 as 1.1.
5% is shown in cell E34 as 1.15
s/b 15,180
s/b 19580
s/b 11880
s/b 5,220
BU 660
Mod 3, Ch 6-8
Practice and PT templates
7-23
17 ed.
Budget
actual
Number
of
checkbooks
Number produced
and sold
Selling
price
per book
Variable cost
per book
Fixed costs for
the month
results for
September
2017
Actual
1
1
Units sold
Revenue
Variable costs
Contribution
margin
Fixed costs
Operating
income
0
StaticBudget
Static
Static
Budget
Variances
Static
Budget
(2) = (1) –
(3)
0U
$0
0U
$0
0F
$0
0
$0
Average selling
price per book
Variable cost per
book
Fixed costs for
the month
3
0
$0
$0
0U
0
0U
0
0U
$0
$0 U
Total static-budget variance
results for
September
2 2017
Actual
1
Units sold
Revenue
Variable costs
0
Flexible
Variances
(2) = (1) –
(3)
0
$0
0F
$0
0F
Note the differences between the blue static varianc
Flexibl
Budget
Sales Volume
Variances
Static
Budget
3
4
5
0
$0
$0
0U
0U
0F
0
$0
$0
Contribution
margin
Fixed costs
Operating
income
$0
0
$0
0F
$0
$0
0U
0F
$0 F
total flexible budget var
total static budget variance
0U
0
$0
$0 U
$0
$0
$0
$0
total sales-volume var
$0 U
3
Level 2 analysis breaks down the static-budget variance into a flexible-budget variance and a sales-volume varianc
allows the managers to see the portion of the variance that arose because sales price and costs were either higher
lower than​ expected, as shown in the flexible-budget variance ​column, and the portion of the variance that arose b
the sales volume was different than​ expected, as shown in the
sales-volume variance
column. The primary reason for the static-budget variance being unfavorable ($17,000 U) is the reduction in unit
from the budgeted 15,000 to an actual 12,000. One explanation for this reduction is the increase in selling price fr
budgeted $20 to an actual $21. Variable costs decreased by $12,000 relative to the flexible budget. This reduction
be a sign of efficient management. Alternatively, it could be due to using lower quality materials (which in turn ad
affected unit volume).
nd a sales-volume variance. This
d costs were either higher or
f the variance that arose because
) is the reduction in unit volume
ncrease in selling price from a
le budget. This reduction could
aterials (which in turn adversely
BU 660
Mod 3, Ch 6-8
Practice and PT templates
P 7-29
17 ed.
1. Materials
standards
DM
pounds
cost
total
0
hrs
per hr.
DL
0
Actual
Finished units budgeted
Actual produced
pounds
DM used
DL hours
DL cost
#DIV/0!
pounds
cost
actual DL rate
per pound
DM purchased
#DIV/0!
Materials Variance
Actual Qty (enter)
Actual Price
Total
0
#DIV/0!
#DIV/0!
Price var.
#DIV/0! U
Actual Qty
Std Price)
Total
Total DM cost variance
Labor
Labor Variance
Actual Hours
Actual Rate
Total
#DIV/0!
#DIV/0!
Actual Hours
Std Rate
Total
Labor rate var.
#DIV/0! U
Labor efficiency ( time) var.
Total Labor cost variance
0
#DIV/0!
Req 1
solution actual input
actual
Budgeted
0
0.00
98055
0.00
0
0
DM purchases
DM Usage
D mfg labor
cost
0
0
0
Solution formula for flexible budget
Direct materials
Direct mfg labor
budgeted
input for
actual
Budgeted
output
price
Flexible budget cost
0
0.00
0
0.00
Solution for price and efficiency variances
Direct materials
Direct mfg labor
price var
#DIV/0!
#DIV/0!
Req 2
Direct Materials control
Direct Materials Price variance
Accounts payable or Cash
Work-in-process Control
Direct Materials control
Direct Materials efficiency variance
Work-in-process Control
Direct mfg. labor price variance
Wages payable control
Direct mfg. labor efficiency variance
3
efficiency
var
0 Note-negative = U
0
0
0
A key point in this problem is that all of these efficiency variances are likely to be insignificant.
small as to be nearly meaningless. Fluctuations about standards are bound to occur in a rando
Practically, from a control viewpoint, a standard is a band or range of acceptable performance
a single-figure measure.
4
The purchasing point is where responsibility for price variances is found most often. The
production point is where responsibility for efficiency variances is found most often. The
Schuyler Corporation may calculate variances at different points in time to tie in with these
different responsibility areas.
Purchases Usage
0
98,055
$0.00
$0.00
$0
$0
Std Qty
Std Price
Total
Efficiency or Quantity var.
$0 F
#DIV/0! U
0
$0.00
$0
$0 F
U
Std Hrs
Std Rate
Total
0
$0.00
$0
0
$0.00
$0
#DIV/0!
#DIV/0!
$0
$0
$0
$0
$0
#DIV/0!
#DIV/0!
$0
are likely to be insignificant. They are so
re bound to occur in a random fashion.
e of acceptable performance rather than
und most often. The
und most often. The
e to tie in with these
BU 660
Mod 3, Ch 6-8
Practice and PT templates
P 8-21
17 ed.
Required:
1 Compute the flexible-budget variance, the spending variance, and the efficiency variance for
2 Comment on the results.
SOLUTION
Variable manufacturing overhead, variance analysis.
Part 1
Variable Manufacturing Overhead Variance Analysis for Esquire Clothing for June 2017
Flexible Budget:
Budgeted Input Qty.
Allowed for
Actual Output
× Budgeted Rate
Actual Costs Incurred
Actual Input Qty.
× Actual Rate
Actual Input Qty.
× Budgeted Rate
-1
(4,536 × $11.50)
$0
Spending variance
(2-1)
-2
(4,536 × $12)
-3
(4 × 1,080 × $12)
-4
(4 × 1,080 × $12)
$0
Efficiency Variance
(3-2)
$0
Flexible budget variance
(3-1)
Part 2
Allocated:
Budgeted Input Qty.
Allowed for
Actual Output
× Budgeted Rate
Never a variance
(3 and 4)
Esquire had a favorable spending variance of $2,268 because the actual variable overhead rate was
$11.50 per direct manufacturing labor-hour versus $12 budgeted. It had an unfavorable efficiency
variance of each suit averaged 4.2 labor-hours (4,536 hours ÷ 1,080 suits) versus 4.0 budgeted labor-hours.
nd the efficiency variance for variable manufacturing overhead.
Clothing for June 2017
check amount
flexible budget variance s/b -324.
head rate was
ble efficiency
budgeted labor-hours.