Beatrice Math offers two tutoring models: individual and group. The individual model provides one-on-one tutoring while the group model consists of groups of no more than four students. The individual model has a budgeted average price of $275. The group model has a budgeted. average price of $75. The manager of the tutoring center believes that 65 percent of the customers will choose the group model. The individual model averages $185 and the group model averages $45 in budgeted variable cost. The manager estimates that about 160 people will purchase tutoring services in any month. For October, the tutoring center served a total of 170 customers, including 110 that chose the group option. Required: a. Compute the sales activity variance for the tutoring center for October. b. Compute the mix and quantity variances for October.

Beatrice Math offers two tutoring models: individual and group. The individual model provides one-on-one tutoring while the group model consists of groups of no more than four students. The individual model has a budgeted average price of $275. The group model has a budgeted. average price of $75. The manager of the tutoring center believes that 65 percent of the customers will choose the group model. The individual model averages $185 and the group model averages $45 in budgeted variable cost. The manager estimates that about 160 people will purchase tutoring services in any month. For October, the tutoring center served a total of 170 customers, including 110 that chose the group option. Required: a. Compute the sales activity variance for the tutoring center for October. b. Compute the mix and quantity variances for October.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 38P: Friendly Bank is attempting to determine the cost behavior of its small business lending operations....

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Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?
The Sea Wharf Restaurant would like to determine the best way to allocate a monthly advertising budget of 1,000 between newspaper advertising and radio advertising. Management decided that at least 25% of the budget must be spent on each type of media and that the amount of money spent on local newspaper advertising must be at least twice the amount spent on radio advertising. A marketing consultant developed an index that measures audience exposure per dollar of advertising on a scale from 0 to 100, with higher values implying greater audience exposure. If the value of the index for local newspaper advertising is 50 and the value of the index for spot radio advertising is 80, how should the restaurant allocate its advertising budget to maximize the value of total audience exposure? a. Formulate a linear programming model that can be used to determine how the restaurant should allocate its advertising budget in order to maximize the value of total audience exposure. b. Develop a spreadsheet model and solve the problem using Excel Solver.
Cold X, Inc. uses this information when preparing their flexible budget: direct materials of $2 per unit, direct labor of $3 per unit, and manufacturing overhead of $1 per unit. Fixed costs are $35,000. What would be the budgeted amounts for 20,000 and 25,000 units?
ShawnTech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting: Fixed element per month variable element per student variable element per course revenue $0 $354 $0 faculty wages $0 $0 $2,300 course supplies $0 $48 $40 administrative expenses $41,700 $13 $21 In October, the school budgeted for 1,400 students and 127 courses. The actual activity for the month was 1,500 students and 129 courses. Prepare a report showing the school's activity variances for October. Label each variance as favorable (F) or unfavorable (U).
In an effort to raise the demand for reading tests, managers are planning to lower the price from $36 per test to $20 per test, the current price of the math test. They believe that doing so will increase the demand for reading tests to 60,000. Prepare a contribution format income statement reflecting Abado’s new pricing and demand structure. Abado Profiles provides testing services to school districts that wish to assess students’ reading and mathematical abilities. Last year Abado evaluated 60,000 math tests and 20,000 reading tests. An income statement for last year follows. Math Testing Reading Testing Total Per Unit Total Per Unit Total Company Sales revenue $1,200,000 $20 $720,000 $36 $1,920,000 Variable expenses 840,000 14 360,000 18 1,200,000 Contribution margin $360,000 $6 $360,000 $18 720,000 Fixed expenses 360,000 Operating income $360,000
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniorswho live in their own homes within the Jackson County area. (DATA is Available in the picture) The company measures its activity in terms of flights. Customers can buy individual tickets for overflightsor hire an entire plane for an overflight at a discount. Required: Prepare the company Planning Budget by using planning data at 60 Flights. Prepare company flexible budgets by flex data (at 70 Flights) Prepare a complete variance report showing the company’s Activity and Revenue and spending variances for August.
Roberds Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting: Fixed element per month Variable element per student Variable element per course Revenue $ 0 $ 298 $ 0 Faculty wages $ 0 $ 0 $ 3,100 Course supplies $ 0 $ 52 $ 40 Administrative expenses $ 26,500 $ 27 $ 52 In March, the school budgeted for 1,910 students and 88 courses. The school's income statement showing the actual results for the month appears below: Roberds Tech Income Statement For the Month Ended March 31 Actual students 1,810 Actual courses 91 Revenue $ 411,340 Expenses: Faculty wages 214,950 Course supplies 62,590 Administrative expenses 84,562 Total expense 362,102 Net operating income $ 49,238 Required: Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending…
Triad Children's Center (TCC), a non-profit organization, uses relevant cost analysis to determine whether new services are desirable. TCC is looking at adding a new educational program for grade school children who are having difficulty with their reading and math skills. The following relevant costs are expected if the program is accepted: Costs (per year) Program Director salary $ 39,000 Part-time Assistants $ 28,000 Variable cost per child $ 900 TCC estimates that a maximum of 40 children will participate in this program in the first year. If TCC decides to implement this program, funding will be received from the City Chamber of Commerce ($50,000) and a local Private University Endowment Fund ($35,000). Calculate the expected surplus or deficit from operations given the above information.
Scholar Suppliers manufactures backpacks for students. The backpacks come in two sizes: Small, and Large. Scholar Suppliers anticipates the following sales volumes and prices for the coming period: Size Sales Volume Selling Price Small 3,000 backpacks $25 each Large 6,000 backpacks $75 each What is the budgeted level of revenue for the coming period?
Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows: Budget Actual Regular Majestic Regular Majestic Selling price per unit $ 300 $ 800 $ 325 $ 700 Variable cost per unit $ 220 $ 590 $ 238 $ 583 Sales volume in units 4,500 5,500 7,200 4,800 Master Budget Actual Sales revenue $ 5,750,000 $ 5,700,000 Variable costs 4,235,000 5,512,000 Contribution margin $ 1,515,000 $ 1,188,000 Fixed costs 882,500 919,500 Operating income $ 632,500 $ 268,500 Market data for the year: Expected total demand 500,000 beds Actual total demand 666,667 beds Required Calculate the sales quantity variance in total. Calculate the market share variance for Acme Beds. Calculate the market size variance for Acme beds. What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.
In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,500 + $1.25 DLH Power $0.50 DLH Indirect labor $68,400 + $2.30 DLH Rent $31,500 At the end of the year, Meliore, Inc., actually produced 310,000 units of the standard model and 115,000 of the deluxe model. The actual overhead costs incurred were: Maintenance $ 64,100 Power 12,420 Indirect labor 129,400 Rent 31,500 Required: Prepare a performance report for the period. If there is no variance, enter "0"…
In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,500 + $1.25 DLH Power $0.50 DLH Indirect labor $68,400 + $2.30 DLH Rent $31,500 Required: 1. Prepare an overhead budget for the expected activity level for the coming year. Round your answers to the nearest cent, if required. Meliore, Inc. Overhead Budget For the Year Ended December 31 Per DLH fill in the blank 88a408fe005bff0_1DLH Variable costs: Maintenance $fill in the blank…