Boyne University offers an extensive continuing education program in many cities throughout the state.For the convenience of its faculty and administrative staff and to save costs, the university operates amotor pool. The motor pool operated with 20 vehicles until February, when an additional automobile wasacquired at the request of the university administration. The motor pool furnishes gasoline, oil, and othersupplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs areperformed at a nearby commercial garage. Each year, the supervisor of the motor pool prepares an annualbudget, which is reviewed by the university and approved after suitable modifications.The following cost control report shows actual operating costs for March of the current year comparedto one-twelfth of the annual budget.Boyne University Motor PoolCost Control ReportFor the Month Ended March 31Monthly Budget (Over)Annual (1/12 of Annual March UnderBudget Budget) Actual BudgetMiles .............................................. 600,000 50,000 63,000Autos ............................................. 20 20 21Gasoline ........................................ $ 90,000 $ 7,500 $ 9,350 ($1,850)Oil, minor repairs, parts ................ 24,000 2,000 2,360 (360)Outside repairs .............................. 18,000 1,500 1,420 80Insurance ....................................... 24,000 2,000 2,120 (120)Salaries and benefits ..................... 90,480 7,540 7,540 0Vehicle depreciation ...................... 60,000 5,000 5,250 (250)Total ............................................... $306,480 $25,540 $28,040 ($2,500)The annual budget was based on the following assumptions:a. $0.15 per mile for gasoline.b. $0.04 per mile for oil, minor repairs, and parts.c. $900 per automobile per year for outside repairs.d. $1,200 per automobile per year for insurance.e. $7,540 per month for salaries and benefits.f. $3,000 per automobile per year for depreciation.The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of themotor pool’s performance.Required:1. Prepare a new performance report for March based on a flexible budget that shows spendingvariances.2. What are the deficiencies in the original cost control report? How does the report that you prepared inpart (1) above overcome these deficiencies?
Boyne University offers an extensive continuing education program in many cities throughout the state.
For the convenience of its faculty and administrative staff and to save costs, the university operates a
motor pool. The motor pool operated with 20 vehicles until February, when an additional automobile was
acquired at the request of the university administration. The motor pool furnishes gasoline, oil, and other
supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are
performed at a nearby commercial garage. Each year, the supervisor of the motor pool prepares an annual
budget, which is reviewed by the university and approved after suitable modifications.
The following cost control report shows actual operating costs for March of the current year compared
to one-twelfth of the annual budget.
Boyne University Motor Pool
Cost Control Report
For the Month Ended March 31
Monthly Budget (Over)
Annual (1/12 of Annual March Under
Budget Budget) Actual Budget
Miles .............................................. 600,000 50,000 63,000
Autos ............................................. 20 20 21
Gasoline ........................................ $ 90,000 $ 7,500 $ 9,350 ($1,850)
Oil, minor repairs, parts ................ 24,000 2,000 2,360 (360)
Outside repairs .............................. 18,000 1,500 1,420 80
Insurance ....................................... 24,000 2,000 2,120 (120)
Salaries and benefits ..................... 90,480 7,540 7,540 0
Vehicle depreciation ...................... 60,000 5,000 5,250 (250)
Total ............................................... $306,480 $25,540 $28,040 ($2,500)
The annual budget was based on the following assumptions:
a. $0.15 per mile for gasoline.
b. $0.04 per mile for oil, minor repairs, and parts.
c. $900 per automobile per year for outside repairs.
d. $1,200 per automobile per year for insurance.
e. $7,540 per month for salaries and benefits.
f. $3,000 per automobile per year for depreciation.
The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the
motor pool’s performance.
Required:
1. Prepare a new performance report for March based on a flexible budget that shows spending
variances.
2. What are the deficiencies in the original cost control report? How does the report that you prepared in
part (1) above overcome these deficiencies?
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