Marchant Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for June was based on 2,200 meals, but the diner actually served 1,800 meals. The diner's director has provided the following cost data to use in the budget: groceries, $3.85 per meal; kitchen operations, $4,300 per month plus $1.70 per meal; administrative expenses, $2,000 per month plus $0.45 per meal; and fundraising expenses, $1,100 per month. Reguired:Prenare the diner's flexible budaet for the actual number of meals served in June, What is the a mount of total exnenses under the flexible hudget?
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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- The Franklin Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $24,818 of its operating budget to cover the cost of the luncheon. To ensure that costs would be appropriately controlled, Molly Hubbard, the treasurer, prepared the following budget for the Year 2 luncheon. The budget for the luncheon was based on the following expectations: The meal cost per person was expected to be $12.50. The cost driver for meals was attendance, which was expected to be 1,470 individuals. Postage was based on $0.58 per invitation and 3,350 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed. The facility charge is $1,700 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,200. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity. FRANKLIN MANAGEMENT…The Finch Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $24,312 of its operating budget to cover the cost of the luncheon. To ensure that costs would be appropriately controlled, Molly Hubbard, the treasurer, prepared the following budget for the Year 2 luncheon. The budget for the luncheon was based on the following expectations: The meal cost per person was expected to be $12.40. The cost driver for meals was attendance, which was expected to be 1,460 individuals. Postage was based on $0.56 per invitation and 3,300 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed. The facility charge is $1,600 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,100. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity. FINCH MANAGEMENT ASSOCIATION…Southwestern Freight Forwarders is planning to hold a fundraising event to build an elementary school according to the company’s corporate social responsibility targets, at one of the local country It has two options for the event: OPTION 1: Crestview Country Club Fixed rental cost of $1,000 $12 per person for food OPTION 2: Tallgrass Country Club Fixed rental cost of $3,000 A caterer who charges $8.00 per person for food Southwestern Freight Forwarders has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $1,200. Tickets are expected to be $30 per person. Local freight business supporters will donate any other items required for the event. Which option provides the least amount of risk? Which option provides the greatest operating income if 600 people attend? Which option provides the greatest degree of operating leverage if 600 people attend? Which option would you choose? Why?
- Southwestern Freight Forwarders is planning to hold a fundraising event to build an elementary school according to the company’s corporate social responsibility targets, at one of the local country clubs. It has two options for the event: OPTION 1: Crestview Country Cluba. Fixed rental cost of $1,000b. $12 per person for food OPTION 2: Tallgrass Country Cluba. Fixed rental cost of $3,000b. A caterer who charges $8.00 per person for food Southwestern Freight Forwarders has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local freight businesssupporters will donate any other items required for the event. a) Which option provides the least amount of risk? b) Which option provides the greatest operating income if 600 people attend? c) Which option provides the greatest degree of operating leverage if 600 people attend? d) Which option would you choose? Why?Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her forecasted income statement for April, when she expects to produce and sell 4, 000 meals: Amount Per Unit Sales revenue $ 28,000 $7.00 costs of meals produced 20,000 5.00 Gross Profit $ 8,000 $ 2.00 Administrative costs 3,200 .08 Operating profit $ 4,800 $ 1.20 Fixed costs included in this income statement are $6,400 for meal production and $800 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $4.00 per meal for 300 meals on April…Super Seniors is a not-for-profit organization that provides services to senior citizens. Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year’s full-time secretary who earned $10,000. Services performed by other volunteers for special events had an estimated value of $15,000. These volunteers were employees of local businesses, and they received small-value items for their participation. What amount should Super report for salary and wage expenses related to the above items? a. $150,000 b. $160,000 c. $165,000 d. $175,000
- Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her forecasted income statement for April, when she expects to produce and sell 2,000 meals: Amount Per Unit Sales revenue $ 10,000 $ 5.00 Costs of meals produced 8,000 4.00 Gross profit $ 2,000 $ 1.00 Administrative costs 1,000 0.50 Operating profit $ 1,000 $ 0.50 Fixed costs included in this income statement are $2,800 for meal production and $400 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.00 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Required: a. What…Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her forecasted income statement for April, when she expects to produce and sell 2,200 meals: Amount Per Unit Sales revenue $ 11,440 $ 5.20 Costs of meals produced 9,020 4.10 Gross profit $ 2,420 $ 1.10 Administrative costs 1,100 0.50 Operating profit $ 1,320 $ 0.60 Fixed costs included in this income statement are $3,124 for meal production and $440 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.10 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Required: a. What…Last year the Diamond Manufacturing Company purchased over $10 million worth of of- fice equipment under its “special ordering” system, with individual orders ranging from $5,000 to $30,000. Special orders are for low-volume items that have been included in a department manager’s budget. The budget, which limits the types and dollar amounts of office equipment a department head can requisition, is approved at the beginning of the year by the board of directors. The special ordering system functions as follows.Purchasing A purchase requisition form is prepared and sent to the purchasing de- partment. Upon receiving a purchase requisition, one of the five purchasing agents (buyers) verifies that the requester is indeed a department head. The buyer next se- lects the appropriate supplier by searching the various catalogs on file. The buyer then phones the supplier, requests a price quote, and places a verbal order. A prenumbered purchase order is processed, with the original sent to the…
- The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: Cash balance on June 1 is $1,286. Actual sales for April and May are as follows: April May Cash sales $10,000 $18,000 Credit sales 28,900 35,000 Total sales $38,900 $53,000 Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. Inventory purchases average 66% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. Rent is $4,100 per month. Taxes to be paid in June are $6,780. The owner also tells you that…The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: Cash balance on June 1 is $786. Actual sales for April and May are as follows: April May Cash sales $10,000 $18,000 Credit sales 28,900 35,000 Total sales $38,900 $53,000 Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. Inventory purchases average 66% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. Rent is $5,200 per month. Taxes to be paid in June are $6,780. The owner also tells you that he…The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: Cash balance on June 1 is $836. Actual sales for April and May are as follows: April May Cash sales $10,000 $18,000 Credit sales 28,900 35,000 Total sales $38,900 $53,000 Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. Inventory purchases average 66% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. Rent is $5,100 per month. Taxes to be paid in June are $6,780. The owner also tells you that he…