Chapter 21: Q1DQ (page 967)
What limits the usefulness to managers of fixed budget performance reports?
Fixed budget performance reports contain limited usefulness characteristics for the managers.
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Solitaire Company’s fixed budget performance report for June follows. The \(315,000 budgeted expenses include \)294,000 variable expenses and \(21,000 fixed expenses. Actual expenses include \)27,000 fixed expenses. Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately.
Fixed Budget Actual Results Variances
Sales (in units) 8,400 10,800
Sales (in dollars) \(420,000 \)540,000 \(120,000 F
Total expenses 315,000 378,000 63,000 U
Income from operations \)105,000 \(162,000 \)57,000 F
Comp Wiz sells computers. During May 2017, it sold 350 computers at a \(1,200 average price each. The May 2017 fixed budget included sales of 365 computers at an average price of \)1,100 each.
1. Compute the sales price variance and the sales volume variance for May 2017.
2. Interpret the findings.
A manufactured product has the following information for June.
Standard Actual
Direct materials 6 lbs.@ \(8 per lbs. 48,500 lbs.@ \)8.10 per lb.
Direct labor 2 hrs.@ \(16 per hr. 15,700 hrs.@ \)16.50 per hr.
Overhead 2 hrs.@ \(12 per hr. \)198,000
Units manufactured 8,000
Compute the:
(1) Standard cost per unit and
(2) Total cost variance for June. Indicate whether the cost variance is favorable or unfavorable.
In a recent year, BMW sold 182,158 of its 1 Series cars. Assume the company expected to sell 191,158 of these cars during the year. Also assume the budgeted sales price for each car was \(30,000 and the actual sales price for each car was \)30,200. Compute the sales price variance and the sales volume variance.
Refer to the information from QS 21-18. Compute the variable overhead spending variance and the variable overhead efficiency variance and classify each as favorable or unfavorable.
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