Chapter 23: Q19RQ (page 1305)
Briefly describe how journal entries differ in a standard cost system.
The difference in journal entries are in raw material, WIP inventory, finished goods inventory and variances
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Murphy Company managers received the following incomplete performance report:
Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)
Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.
Cell One Technologies manufactures capacitors for cellular base stations and other communications applications. The company’s July 2018 flexible budget shows output levels of 6,000, 7,500, and 9,500 units. The static budget was based on expected sales of 7,500 units.
CELL ONE TECHNOLOGIES Flexible Budget For the Month Ended July 31, 2018 |
Budget Amount per Unit |
Units 6,000 7,500 9,500 |
Sales Revenue \(21 \)126,000 \(157,500 \)199,500 |
Variable Expenses 10 60,000 75,000 95,000 |
Contribution Margin 66,000 82,500 104,500 |
Fixed Expenses 55,000 55,000 55,000 |
Operating Income \(11,000 \)27,500 \(49,500 |
The company sold 9,500 units during July, and its actual operating income was as follows:
CELL ONE TECHNOLOGIES Income Statement For the Month Ended July 31, 2018 |
Sales Revenue \)206,500 |
Variable Expenses 100,100 |
Variable Expenses 106,400 |
Fixed Expenses 56,000 |
Operating Income $504,00 |
Requirements
1. Prepare a flexible budget performance report for July.
2. What was the effect on Cell One’s operating income of selling 2,000 units more than the static budget level of sales?
3. What is Cell One’s static budget variance for operating income?
4. Explain why the flexible budget performance report provides more useful information to Cell One’s managers than the simple static budget variance. What insights can Cell One’s managers draw from this performance report?
Question:How is the fixed overhead volume variance different from the other variances?
What is a variance?
Question: What is a static budget performance report?
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