GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
4th Edition
ISBN: 9781259911682
Author: Eric Noreen
Publisher: McGraw-Hill Education
Question
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Chapter 10, Problem 10.28C

1

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties

Prepare flexible budget performance report for the year that shows both spending and activity variance.

1

Expert Solution
Check Mark

Answer to Problem 10.28C

Explanation of Solution

Actors and directors wages:

  Varible costs respect to number of performances=Total CostsNumber of performances

  Varible costs respect to number of performances=$216,000108Varible costs respect to number of performances=$2,000q2

Stagehands wages:

  Varible costs respect to number of performances=Total CostsNumber of performances

  Varible costs respect to number of performances=$32,400108Varible costs respect to number of performances=$300q2

Ticket booth personnel and usher wages:

  Varible costs respect to number of performances=Total CostsNumber of performances

  Varible costs respect to number of performances=$16,200108Varible costs respect to number of performances=$150q2

Theater Hall Rent:

  Varible costs respect to number of performances=Total CostsNumber of performances

  Varible costs respect to number of performances=$54,000108Varible costs respect to number of performances=$500q2

Printed programs

  Varible costs respect to number of performances=Total CostsNumber of performances

  Varible costs respect to number of performances=$27,000108Varible costs respect to number of performances=$250q2

Costumes and props:

  Varible costs respect to number of productions=Total CostsNumber of production

  Varible costs respect to number of productions=$108,0006Varible costs respect to number of productions=$18,000q1

Publicity

  Varible costs respect to number of productions=Total CostsNumber of production

  Varible costs respect to number of productions=$12,0006Varible costs respect to number of productions=$2,000q1

Administrative expenses:

Total administrative expenses = $43,200

Fixed expenses= $43,200×75%=$32,400

Variable expenses:

  Varible costs respect to number of productions=Total CostsNumber of production

  Varible costs respect to number of productions=$43,200×15%6Varible costs respect to number of productions=$1,080q1

  Varible costs respect to number of productions=Total CostsNumber of production

  Varible costs respect to number of productions=$43,200×10%108Varible costs respect to number of productions=$40q2

Administrative expenses cost equations = $32,400+ $1,080q1 +$40q2

Flexible Budget Performance Report

    ParticularsActual Results- 1Spending variance- (1-2)Flexible budget- 2Activity Variance- (2-3)Planning Budget- 3
    Number of production q1776
    Number of performances q2168168108
    Expenses:
    Actors and directors wages ($2,000 q2)3418,000(5,800)U336,000(120,000)U216,000
    Stagehand wages ($300 q2)49,700700 F50,400(18,000)U32,400
    Ticket booth personnel and ushers wages ($150 q2)25,900(700) U25,200(9,000)U16,200
    Scenery, costumes and props($18,000 q1)130,600(4,600) U126,000(18,000)U108,000
    Theater Hall Rent ($500 q2)78,0006,000 F84,000(30,000)U54,000
    Printed Programs($250 q2)38,3003,700 F42,000(15,000)U27,000
    Publicity ($2,000 q1)15,100(1,100)U14,000(2,000)U12,000
    Administrative Expenses ($32,400+1,080 q1 +$40 q2)47,500(8520)U46,6800(3,480)U43,200
    726,900(2620)U724,280(215,480)U508,800

Activity Variances Unfavorable by $215,480($724,280-$508,800)

Activity Variances Favorable by $2,620($726,900-$724,280)

2

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties

Review the control system of handling the cost.

2

Expert Solution
Check Mark

Answer to Problem 10.28C

Spending variance is less unfavorable balance of $2,620 if compared to the amount of costs. So, it can be said that cost is under control.

Explanation of Solution

Spending variance is compute between the expenses in flexible budget and actual total expenses. If flexible budget are lower than the actual expenses then variable is determined as unfavorable. If flexible budget are greater than the actual expenses then variable is determined as favorable.

Spending variance is less unfavorable balance of $2,620 if compared to the amount of costs. So, it can be said that cost is under control.

If unfavorable amount is compared then actors and directors wages comes first and scenery, costumes, and props come second. Unfavorable amount occur due to the high quality productions to attract the theater-goers.

3

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties

Review the figures that predict the cost of a new production or of an additional performance of particular production.

3

Expert Solution
Check Mark

Answer to Problem 10.28C

It cannot be considered that averages will lead a proper costing of productions and performances. Averages ignores different requirement of different theatre shows by this variable nature of costs is ignored.

Explanation of Solution

Average cost is not a good indicator of cost for predicting new production or an additional performance of particular production. Average of additional performance is not taken into consideration variable nature of cost.

Different actors and different costumes are required for different theater shows. If number of actors is increased the number of costumes also increases that will increase the cost.

But if average is considered then cost per production and cost per performance can be equal for different shows. Hence it cannot be considered that averages will lead a proper costing of productions and performances. Averages ignores different requirement of different theatre shows by this variable nature of costs is ignored.

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