Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 8, Problem 1PSA

1.

To determine

The items listed in the flexible budget as variable or fixed and their amount per unit or for the year.

1.

Expert Solution
Check Mark

Explanation of Solution

The flexible budget for the year ended December 31, 2017.

Variable cost ($)
Fixed cost ($)
Cost Total Per unit
Variable cost:
Direct materials 975,000 65.00
Direct labor 225,000 15.00
Machinery repairs 60,000 4.00
Utilities 45,000 3.00
Packaging 75,000 5.00
Shipping 105,000 7.00
Fixed cost:
Utilities 150,000
Plant manager salaries 200,000
Depreciation 300,000
Sales salary 250,000
Advertising expense 125,000
Administrative salaries 241,000
Entertainment expense 90,000
Table(1)

Thus, the variable costs per unit and in total and the fixed costs in total are as mentioned above.

2.

To determine

The flexible budget.

2.

Expert Solution
Check Mark

Explanation of Solution

The flexible budget for 14,000 and 16,000 units.

Particulars Variable cost per unit ($) Total fixed cost ($)
Flexible budget ($)
Production 14,000 units 16,000 units
Sales 2,800,000 3,200,000
Less: Variable costs
Direct materials 65.00 910,000 1,040,000
Direct labor 15.00 210,000 240,000
Machinery repairs 4.00 56,000 64,000
Utilities 3.00 42,000 48,000
Packaging 5.00 70,000 80,000
Shipping 7.00 98,000 112,000
Total variable cost 1,386,000 1,584,000
Less: Fixed costs
Utilities 150,000 150,000 150,000
Plant manager salaries 200,000 200,000 200,000
Depreciation 300,000 300,000 300,000
Sales salary 250,000 250,000 250,000
Advertising expense 125,000 125,000 125,000
Administrative salaries 241,000 241,000 241,000
Entertainment expense 90,000 90,000 90,000
Total fixed cost 1,356,000 1,356,000 1,356,000
Total overheads 2,742,000 2,940,600
Budgeted income 58,000 259,400
Table(2)

Thus, the budgeted income for the 14,000 units is $58,000 and for 16,000 units is $259,400.

3.

To determine

The increase in the operating income.

3.

Expert Solution
Check Mark

Explanation of Solution

Given,
The sales volume is of 18,000 units.
The budgeted amount is $159,000.

Compute increase in the operating income.

The formula to calculate the increase is,

   Increaseinbudgetedincome=( Budgetedincomeonexpectedunits Givenbudgetedincome )

Substitute $462,000 for the budgeted income on expected units (refer working note) and $159,000 for the given budgeted income.

   Increaseinbudgetedincome=$462,000$159,000 =$303,000

The increase in operating income is $303,000.

Working note:

Calculation of the variable cost per unit,

   Totalvariablecostperunit=( $65+$15+$4 +$3+$5+$7 ) =$99

The variable cost per unit is $99.

Calculation of the budgeted income at 18,000 units,

Particulars
Amount ($)
Sales ( 18,000×$200 ) 3,600,000
Less: Variable costs ( 18,000×$99 ) 1,782,000
Less: Fixed costs 1,356,000
Budgeted income 462,000
Table(3)

The budgeted income is $462,000.

Hence, the operating income would increase by $303,000.

4.

To determine

The income or loss from operations if the business falls to 12,000 units.

4.

Expert Solution
Check Mark

Explanation of Solution

Given,
The sales units are 12,000 units.

Calculation of the budgeted income or loss,

Particulars Amount ($)
Sales ( 12,000×$200 ) 2,400,000
Less: Variable costs ( 12,000×$99 ) 1,188,000
Less: Fixed costs 1,356,000
Budgeted income (144,000)
Table(4)

Thus, there is an operating loss of $144,000 at the sales level of 12,000 units.

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Chapter 8 Solutions

Managerial Accounting

Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 1QSCh. 8 - Prob. 2QSCh. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - Prob. 5QSCh. 8 - Prob. 6QSCh. 8 - Prob. 7QSCh. 8 - Prob. 8QSCh. 8 - Prob. 9QSCh. 8 - Materials cost variances P2 Juan Company’s output...Ch. 8 - Prob. 11QSCh. 8 - Prob. 12QSCh. 8 - Prob. 13QSCh. 8 - Prob. 14QSCh. 8 - Prob. 15QSCh. 8 - Prob. 16QSCh. 8 - A Preparing overhead entries P5 Refer to the...Ch. 8 - A Total variable overhead cost variance P4 Mosaic...Ch. 8 - A Overhead spending and efficiency variances P4...Ch. 8 - Computing sales price and volume variances A1...Ch. 8 - Sales variances A1 In a recent year, BMW sold...Ch. 8 - Prob. 22QSCh. 8 - Prob. 23QSCh. 8 - Prob. 24QSCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Exercise 21-8 Standard unit cost; total variance...Ch. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Exercise 21-14A Materials variances recorded and...Ch. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Exercise 21-19 Computation of total overhead rate...Ch. 8 - Exercise 21-20 Computation of volume and...Ch. 8 - Exercise 21-21 Overhead controllable and volume...Ch. 8 - Prob. 22ECh. 8 - Exercise 21-23 Computing and interpreting sales...Ch. 8 - Prob. 1PSACh. 8 - Prob. 2PSACh. 8 - Prob. 3PSACh. 8 - Prob. 4PSACh. 8 - Prob. 5PSACh. 8 - Problem 21-6AA Materials, labor, and overhead...Ch. 8 - Prob. 1PSBCh. 8 - Prob. 2PSBCh. 8 - Prob. 3PSBCh. 8 - Prob. 4PSBCh. 8 - Prob. 5PSBCh. 8 - Problem 21-6BA Materials, labor, and overhead...Ch. 8 - Prob. 8SPCh. 8 - Flexible budgets and standard costs emphasize the...Ch. 8 - Prob. 2AACh. 8 - Prob. 3AACh. 8 - Prob. 1BTNCh. 8 - The reason we use the words favorable when...Ch. 8 - Prob. 3BTNCh. 8 - Prob. 4BTNCh. 8 - Prob. 5BTNCh. 8 - Prob. 6BTN
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What is Budgeting? | Budgetary control | Advantages & Limitations of Budgeting; Author: Educationleaves;https://www.youtube.com/watch?v=INnPo0QPXf4;License: Standard youtube license