Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 15, Problem 11E
Exercise 8-7A Evaluating a decision to increase sales volume by lowering sales price
Secor Educational Services had budgeted its training service charge at $120 per hour. The company planned to provide 30,000 hours of training services during 2019. By lowering the service charge to $114 per hour, the company was able to increase the actual number of hours to 31,500.
Required
- a. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U).
- b. Determine the flexible
budget variance , and indicate whether it is favorable (F) or unfavorable (U). - c. Did lowering the price of training services increase revenue? Explain.
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Question #2
Sunshine Goods Ltd is a revenue maximizing firm that engages in the analysis of variances to provide useful information to management. The company manufactures and sells three (3) products, RG, KC and MG. During July 2019 the following budgeted and actual results were presented to you the management accountant for analysis:
Budgeted Results
Product
Total Sales $
Volume/units
Price $
Contribution margin per unit $
Total contribution margin $
RG
585,000
900
650
820
738,000
KC
500,000
500
1,000
850
425,000
MG
300,000
600
500
720
432,000
Total
2,000
1,595,000
Actual Results
Product
Total Sales $
Volume/units
Price $
Contribution margin per unit $
Total contribution margin $
RG
500,000
500
1,000
800
400,000
KC
270,000
300
900
`900
270,000
MG
105,000
350
300
700
245,000
Total
1,150
915,000
Required
Total sales…
Question:1
The LM30 Company produces circuits for TV manufacturers. A new accountant intern at
LM30 has accidentally deleted the company's variance analysis calculations for the year
ended December 31, 2020. The following table is what remains of the data.
Performance Report, Year Ended December 31, 2020
Flexible
Sales
Budget Flexible
Actual Results Variance Budget Variances
Volume
Static
Budget
Units Sold
170,000
150,000
Revenues
$1,080,000.00
$900,000.00
$745,000.00
$335,000.00
$600,000.00
$300,000.00
Variable Costs
Contribution margin
Fixed costs
$140,000.00
$120,000.00
Operating income
$195,000.00
$180,000.00
Exercise 8-7A (Algo) Evaluating a decision to increase sales volume by lowering sales price LO 8-3, 8-4
Finch Educational Services had budgeted its training service charge at $82 per hour. The company planned to provide 37,000 hours of
training services during Year 3. By lowering the service charge to $67 per hour, the company was able to increase the actual number
of hours to 38,200.
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?
a. Volume variance
b. Flexible budget variance
c. Was the decision profitable ?
Sales
Chapter 15 Solutions
Survey Of Accounting
Ch. 15 - 1. Pam Kelly says she has no faith in budgets. Her...Ch. 15 - 7. What is a responsibility center?Ch. 15 - Prob. 3QCh. 15 - Prob. 4QCh. 15 - Prob. 5QCh. 15 - 3. When are sales and cost variances favorable and...Ch. 15 - 4. Joan Mason, the marketing manager for a large...Ch. 15 - Prob. 8QCh. 15 - Prob. 9QCh. 15 - Prob. 10Q
Ch. 15 - Prob. 11QCh. 15 - 9. Minnie Divers, the manager of the marketing...Ch. 15 - 6. How do responsibility reports promote the...Ch. 15 - Prob. 14QCh. 15 - Prob. 15QCh. 15 - Prob. 16QCh. 15 - 12. How can a residual income approach to...Ch. 15 - Prob. 18QCh. 15 - Exercise 9-6A Evaluating a profit center Helen...Ch. 15 - Prob. 2ECh. 15 - Prob. 3ECh. 15 - Prob. 4ECh. 15 - Exercise 8-3A Determining amount and type...Ch. 15 - Prob. 6ECh. 15 - Exercise 8-4A Determining sales and variable cost...Ch. 15 - Exercise 8-5A Determining flexible budget...Ch. 15 - Exercise 8-9A Responsibility for the fixed cost...Ch. 15 - Prob. 10ECh. 15 - Exercise 8-7A Evaluating a decision to increase...Ch. 15 - Prob. 12ECh. 15 - Prob. 13ECh. 15 - Exercise 9-9A Residual income Climax Corporation...Ch. 15 - Residual income Gletchen Cough Drops operates two...Ch. 15 - Prob. 16ECh. 15 - Prob. 17ECh. 15 - Prob. 18PCh. 15 - Prob. 19PCh. 15 - Prob. 20PCh. 15 - Prob. 21PCh. 15 - Problem 9-20A Return on investment Sorrento...Ch. 15 - Problem 9-21A Comparing return on investment and...Ch. 15 - Comparing return on investment and residual income...Ch. 15 - ATC 8-1 Business Applications Case Static versus...Ch. 15 - Prob. 2ATCCh. 15 - Prob. 3ATCCh. 15 - ATC 9-1 Business Applications Case Analyzing...Ch. 15 - Prob. 5ATC
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