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Comprehensive
Given the narrow margins in the generic veterinary drugs industry, Ellis relies on tight
Average selling price per vial | $ 8.30 |
Total direct materials cost per vial | $ 3.60 |
Direct |
$ 15.00 |
Average labor productivity rate (vials per hour) | 100 |
Sales commission cost per vial | $ 0.72 |
Fixed administrative and manufacturing overhead | $990,000 |
Ellis budgeted sales of 700,000 vials for April. At the end of the month, the controller revealed that actual results for April had deviated from the budget in several ways:
- Unit sales and production were 90% of plan.
- Actual average selling price decreased to $8.20.
- Productivity dropped to 90 vials per hour.
- Actual direct manufacturing labor cost was $15.20 per hour.
- Actual total direct material cost per unit increased to $3.90.
- Actual sales commissions were $0.70 per vial.
- Fixed overhead costs were $110,000 above budget.
Calculate the following amounts for Ellis for April 2017:
- 1. Static-budget and actual operating income
Required
- 2. Static-
budget variance for operating income - 3. Flexible-budget operating income
- 4. Flexible-budget variance for operating income
- 5. Sales-volume variance for operating income
- 6. Price and efficiency variances for direct manufacturing labor
- 7. Flexible-budget variance for direct manufacturing labor
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Chapter 7 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
- Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activity supply: five purchasing agents capable of processing 2,400 orders per year (12,000 orders) Purchasing agent cost (salary): 45,600 per year Actual usage: 10,600 orders per year Value-added quantity: 7,000 orders per year Required: 1. Calculate the volume variance and explain its significance. 2. Calculate the unused capacity variance and explain its use. 3. What if the actual usage drops to 9,000 orders? What effect will this have on capacity management? What will be the level of spending reduction if the value-added standard is met?arrow_forwardVariance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April. 1. How many offices, on average, did Brown budget for each employee? How many offices did each employee actually clean? 2. Prepare a flexible budget for April 2017. 3. Compute the sales price variance and the labor efficiency variance for each labor type. 4. What information, in addition to that provided in the income statements, would you want Brown to…arrow_forwardVariance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April. 3. Compute the sales price variance and the labor efficiency variance for each labor type.arrow_forward
- Jordan Educational Services had budgeted its training service charge at $71 per hour. The company planned to provide 31,000 hours of training services during the year. By lowering the service charge to $55 per hour, the company was able to increase the actual number of hours to 32,000. Required a. Determine the sales volume variance, and indicate whether it is favorable or unfavorable. Note: Select "None" if there is no effect (i.e., zero variance). b. Determine the flexible budget variance, and indicate whether it is favorable or unfavorable. Note: Select "None" if there is no effect (i.e., zero variance). c. Did lowering the price of training services increase revenue? a. Volume variance b. Flexible budget variance c. Did lowering the price of training services increase revenue? Salesarrow_forwardMunoz Educational Services had budgeted its training service charge at $69 per hour. The company planned to provide 31,000 hours of training services during the year. By lowering the service charge to $63 per hour, the company was able to increase the actual number of hours to 32,800. Required a. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) b. Determine the flexible budget variance, and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) c. Did lowering the price of training services increase revenue? Variance a. Volume variance b. Flexible budget variance c. Was the decision profitable? MacBook Airarrow_forwardFranklin Educational Services had budgeted its training service charge at $75 per hour. The company planned to provide 26,000 hours of training services during Year 3. By lowering the service charge to $57 per hour, the company was able to increase the actual number of hours to 27,600. Required a. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance). b. Determine the flexible budget variance, and indicate whether it is favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance). c. Did lowering the price of training services increase revenue?arrow_forward
- Question Variance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April. 4. What information, in addition to that provided in the income statements, would you want Brown to gather, if you wanted to improve operational efficiency?arrow_forwardQuestion Variance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April. 1. How many offices, on average, did Brown budget for each employee? How many offices did each employee actually clean? 2. Prepare a flexible budget for April 2017.arrow_forwardQuestion Variance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April. 3. Compute the sales price variance and the labor efficiency variance for each labor type. 4. What information, in addition to that provided in the income statements, would you want Brown to gather, if you wanted to improve operational efficiency?arrow_forward
- Camelback Industries operates a delivery service for local restaurants, delivering call-in, to-go meals for restaurant customers. Variable overhead costs are applied at the budgeted rate of $25 per driving hour. The typical round trip takes a driver 15 minutes to complete. Actual results for March follow.Number of round trips run: 1,400Hours of delivery time: 930Variable overhead cost incurred: $4,250Camelback uses flexible budgets and variance analysis to monitor performance.Required:A. Prepare a flexible-budget performance report that shows (1) actual variable overhead, (2) the amount of variable overhead that should have been incurred for the number of round trips taken, and (3) the variance between these amounts.B. Compute the company's variable-overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)arrow_forwardRoyal Ltd has a varied client base that includes schools, hospitals, and the hospitality sector and has experienced fluctuating consumer demands since the beginning of the Covid-19 pandemic. One of their products is a fresh produce box, consisting of local seasonal produce, and which is ordered in units. The following information is available for the year ending 30th September. Due to these fluctuating demands, you have been asked to use Excel to prepare a flexible sales budget for quantities of 200,000 units and 300,000 units. Sales revenue is fully variable. Budget Sales (units) 250,000 £/unit £000s Sales revenue 3,250 Variable produce costs (875) Variable production overheads (150) Fixed production costs (700) Fixed administration costs (1,160) Profit 365arrow_forwardRoboclean Ltd makes two types of robotic vacuum cleaner: iClean and HiClean. Both products offer a high level of cleaning suction, but the HiClean includes the benefit of an anti-allergy filter when the air is expelled. Spring is the busiest time of year and the management accountant has provided the following budgeted information for the month of January 2019: Fixed costs for the month are estimated at £40,000. These are divided equally between the two products. The selling price of iClean is £32.50. The direct costs of each iClean are direct materials £12.00 and direct labour £3.00. The selling price of HiClean is £40.00. The direct costs of each HiClean are direct materials £14.00 and direct labour £2.00. You have been asked to provide a report that will help the managing director consider the effect of changes in the level of sales activity and other factors on the company’s financial objectives for the month. Required Prepare a marginal cost statement for January…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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