Exam 9: Master Budgeting

Rothrock Clinic uses patient-visits as its measure of activity.During December,the clinic budgeted for 3,400 patient-visits,but its actual level of activity was 3,200 patient-visits.The clinic bases its budgets on the following information: Revenue should be $26.20 per patient-visit.Personnel expenses should be $28,200 per month plus $6.70 per patient-visit.Medical supplies should be $1,500 per month plus $3.30 per patient-visit.Occupancy expenses should be $6,800 per month plus $1.00 per patient-visit.Administrative expenses should be $5,000 per month plus $0.20 per patient-visit.The clinic reported the following actual results for December: Required: Prepare a report showing the clinic's revenue and spending variances for December.Label each variance as favorable (F)or unfavorable (U).

Kowaleski Corporation makes a product with the following standard costs: In June the company produced 9,100 units using 27,010 kilos of the direct material and 930 direct labor-hours.During the month the company purchased 30,600 kilos of the direct material at a price of $3.70 per kilo.The actual direct labor rate was $19.90 per hour and the actual variable overhead rate was $4.20 per hour.The materials price variance is computed when materials are purchased.Variable overhead is applied on the basis of direct labor-hours. Required: a.Compute the materials quantity variance. b.Compute the materials price variance. c.Compute the labor efficiency variance. d.Compute the labor rate variance. e.Compute the variable overhead efficiency variance. f.Compute the variable overhead rate variance.

Lantagne Clinic uses client-visits as its measure of activity.During May,the clinic budgeted for 3,800 client-visits,but its actual level of activity was 3,820 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The net operating income in the flexible budget for May would be closest to:

Hagel Clinic uses client-visits as its measure of activity.During July,the clinic budgeted for 2,300 client-visits,but its actual level of activity was 2,320 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for July: Data used in budgeting: Actual results for July: The revenue variance for July would be closest to:

An unfavorable labor rate variance can occur if workers with high hourly wage rates are assigned to work on products with standards that assume workers have low hourly wage rates.

Longview Hospital performs blood tests in its laboratory.The following standards have been set for each blood test performed: During May,the laboratory performed 1,500 blood tests.On May 1 there were no direct materials (plates)on hand;after a plate is used for a blood test it is discarded.Variable overhead is assigned to blood tests on the basis of standard direct labor-hours.The following events occurred during May: • 3,600 plates were purchased for $9,540 • 3,200 plates were used for blood tests • 340 actual direct labor-hours were worked at a cost of $5,550 The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for May is:

An unfavorable spending variance may reflect waste as well as paying too much for inputs.

Gilder Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is:

Vangemert Corporation uses customers served as its measure of activity.During June,the company budgeted for 22,000 customers,but actually served 25,000 customers.The company uses the following revenue and cost formulas in its budgeting,where q is the number of customers served: Revenue: $5.30q Wages and salaries: $35,400 + $1.90q Supplies: $0.70q Insurance: $9,600 Miscellaneous expense: $5,000 + $0.10q The company reported the following actual results for June: Required: Prepare a report showing the company's revenue and spending variances for June.Label each variance as favorable (F)or unfavorable (U).

Zike Corporation's static planning budget for October appears below.The company bases its budgets on machine-hours. In October,the actual number of machine-hours was 6,000,the actual supplies cost was $14,740,the actual power cost was $49,170,the actual salaries cost was $15,390,and the actual equipment depreciation was $63,670. The spending variance for power cost in the performance report for the month should be:

Capilla Urban Diner is a charity supported by donations that provides free meals to the homeless.The diner's budget for October is to be based on 3,300 meals.The diner's director has provided the following cost data to use in the budget: groceries,$2.85 per meal;kitchen operations,$4,100 per month plus $1.25 per meal;administrative expenses,$3,400 per month plus $0.40 per meal;and fundraising expenses,$1,800 per month. Required: Prepare the diner's budget for the month of October.The budget will only contain the costs listed above;no revenues will be on the budget.

Pearle Corporation makes automotive engines.For the most recent month,budgeted production was 3,300 engines.The standard power cost is $9.20 per machine-hour.The company's standards indicate that each engine requires 2.1 machine-hours.Actual production was 3,400 engines.Actual machine-hours were 7,160 machine-hours.Actual power cost totaled $61,815. Required: Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.Show your work!

Letts Corporation manufactures and sells a single product.The company uses units as the measure of activity in its budgets and performance reports.During January,the company budgeted for 7,000 units,but its actual level of activity was 6,970 units.The company has provided the following data concerning the formulas to be used in its budgeting: The selling and administrative expenses in the planning budget for January would be closest to:

A flexible budget can be used to estimate what revenues and costs should have been,given the actual level of activity for the period.

A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period.

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: The direct materials purchases variance is computed when the materials are purchased. What is the materials quantity variance for the month?

Bobe Air uses two measures of activity,flights and passengers,in the cost formulas in its budgets and performance reports.The cost formula for plane operating costs is $44,580 per month plus $2,390 per flight plus $8 per passenger.The company expected its activity in May to be 68 flights and 211 passengers,but the actual activity was 71 flights and 210 passengers.The actual cost for plane operating costs in May was $215,140. The spending variance for plane operating costs in May would be closest to:

Ortman Corporation makes a product with the following standard costs: The company reported the following results concerning this product in May. The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for May is:

Blaney Jeep Tours operates jeep tours in the heart of the Colorado Rockies.The company bases its budgets on two measures of activity (i.e. ,cost drivers),namely guests and jeeps.One vehicle used in one tour on one day counts as a jeep.Each jeep has one tour guide.The company uses the following data in its budgeting: In October,the company budgeted for 456 guests and 115 jeeps.The actual activity for the month was 446 guests and 111 jeeps. Required: Prepare the company's flexible budget for the actual level of activity in October.

Hejl Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $210 per month plus $86 per job plus $15 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in March to be 23 jobs and 222 meals,but the actual activity was 28 jobs and 217 meals.The actual cost for catering supplies in March was $5,830.The spending variance for catering supplies in March would be closest to: