Exam 10: Flexible Budgets and Performance Analysis

Razor Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During November, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 3,010 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for November: -The revenue variance for November would be closest to:

Deleston Boat Wash's cost formula for its cleaning equipment and supplies is $2,150 per month plus $21 per boat. For the month of September, the company planned for activity of 79 boats, but the actual level of activity was 39 boats. The actual cleaning equipment and supplies for the month was $3,110. -The cleaning equipment and supplies in the flexible budget for September would be closest to:

Menson Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,800 units, but its actual level of activity was 5,830 units. The company has provided the following data concerning the formulas to be used in its budgeting: -The net operating income in the planning budget for December would be closest to:

A problem with directly comparing a static planning budget to actual costs is that this comparison fails to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

Garing Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for March was based on 3,600 meals. The diner's director has provided the following cost data to use in the budget: groceries, $2.20 per meal; kitchen operations, $4,300 per month plus $1.90 per meal; administrative expenses, $3,300 per month plus $0.20 per meal; and fundraising expenses, $1,000 per month. The director has also provided the diner's statement of actual expenses for the month: Required: Prepare a report showing the diner's spending variances for each of the expenses and for total expenses for March. Label each variance as favorable (F) or unfavorable (U).

Burget Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,100 client-visits, but its actual level of activity was 2,110 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for July: -The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for July would be closest to:

Menson Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,800 units, but its actual level of activity was 5,830 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 December would be closest to:

The revenue and spending variances are the differences between the static planning budget and the flexible budget.

Lauter Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $5,300 per month plus $480 per press run plus $1,080 per book set-up. The company expected its activity in October to be 169 press runs and 64 book set-ups, but the actual activity was 167 press runs and 60 book set-ups. The actual cost for wages and salaries in October was $155,690. -The wages and salaries in the planning budget for October would be closest to:

Lantrip 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 January, the company budgeted for 356 guests and 174 jeeps. The actual activity for the month was 341 guests and 177 jeeps. Required: Prepare the company's planning budget for January.

Marchi Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 70 guests?

Weisgarber Clinic uses client-visits as its measure of activity. During August, the clinic budgeted for 3,900 client-visits, but its actual level of activity was 3,850 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for August: -The net operating income in the planning budget for August would be closest to:

Kary Clinic uses patient-visits as its measure of activity. During May, the clinic budgeted for 3,800 patient-visits, but its actual level of activity was 4,100 patient-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May: Required: Prepare a report showing the clinic's revenue and spending variances for May. Label each variance as favorable (F) or unfavorable (U).

Mieras Corporation uses customers served as its measure of activity. During January, the company budgeted for 37,000 customers, but actually served 36,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served: Revenue: $2.80q Wages and salaries: $22,800 + $0.90q Supplies: $0.50q Insurance: $7,500 Miscellaneous: $3,800 + $0.30q The company reported the following actual results for January: Required: Prepare a report showing the company's revenue and spending variances for January. Label each variance as favorable (F) or unfavorable (U).

Vilanova Memorial Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for May is to be based on 2,700 meals. The diner's director has provided the following cost formulas to use in the budget: Required: Prepare the diner's budget for the month of May. The budget will only contain the costs listed above; no revenues will be on the budget.

Hoeper Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 2,600 client-visits, but its actual level of activity was 2,570 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: -The administrative expenses in the planning budget for January would be closest to:

Korando Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for June is to be based on 2,900 meals. The diner's director has provided the following cost data to use in the budget: groceries, $2.60 per meal; kitchen operations, $4,200 per month plus $1.15 per meal; administrative expenses, $2,800 per month plus $0.65 per meal; and fundraising expenses, $1,000 per month. Required: Prepare the diner's budget for the month of June. The budget will only contain the costs listed above; no revenues will be on the budget.

Vandall Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 7,300 units, but its actual level of activity was 7,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April: -The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for April would be closest to:

Deleston Boat Wash's cost formula for its cleaning equipment and supplies is $2,150 per month plus $21 per boat. For the month of September, the company planned for activity of 79 boats, but the actual level of activity was 39 boats. The actual cleaning equipment and supplies for the month was $3,110. -The activity variance for cleaning equipment and supplies in September would be closest to:

An unfavorable activity variance for a cost indicates that spending was higher than it should have been for the actual level of activity for the period.