Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 7, Problem 7.21E
Flexible budget. Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. For August 2017, it budgeted to manufacture and sell 3,600 tires at a variable cost of $71 per tire and total fixed costs of $55,000. The budgeted selling price was $114 per tire. Actual results in August 2017 were 3,500 tires manufactured and sold at a selling price of $116 per tire. The actual total variable costs were $280,000, and the actual total fixed costs were $51,000.
- 1. Prepare a performance report (akin to Figure 7-2, page 254) that uses a flexible budget and a static budget.
Required
- 2. Comment on the results in requirement 1.
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Flexible budget. Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. For August 2017, it budgeted to manufacture and sell 3,600 tires at a variable cost of $71 per tire and total xed costs of $55,000. The budgeted selling price was $114 per tire. Actual results in August 2017 were 3,500 tires manufactured and sold at a selling price of $116 per tire. The actual total variable costs were $280,000, and the actual total xed costs were $51,000.
Treanor Enterprises manufactures tires for the Formula I motor racing circuit. For August
2020, it budgeted to manufacture and sell 3,600 tires at a variable cost of $75 per tire and
total fixed costs of $54,500. The budgeted selling price was $109 per tire. Actual results in
August 2020 were 3,500 tires manufactured and sold at a selling price of $110 per tire. The
actual total variable costs were $290,500, and the actual total fixed costs were $51,000.
Read the requirements.
Requirement 1. Prepare a performance report with a flexible budget and a static budget.
Begin with the actual results, then complete the flexible budget columns and the static
budget columns. Label each variance as favorable or unfavorable. (For variances with a $0
balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select
a label.)
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
Actual
Results
Requirements
1. Prepare a performance report…
Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. For August 2017 it budgeted to manufacture and sell 3,600 tires at a variable cost of $71 per tire and total fixed costs of $55,000. The budgeted selling price was $114 per tire. Actual results in August 2017 weere 3,500 tires manufactured and sold at a selling price of $116 per tire. The actual total variable costs were $280,000, and the actual total fixed costs were $51,000.
Prepare a performance report that uses flexible budget and a static budget. Determine if the result are favorable or unfavorable.
Comment on the results
Chapter 7 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...
Ch. 7 - How does variance analysis help in continuous...Ch. 7 - Why might an analyst examining variances in the...Ch. 7 - Prob. 7.13QCh. 7 - When inputs are substitutable, how can the direct...Ch. 7 - Benchmarking against other companies enables a...Ch. 7 - Metal Shelf Companys standard cost for raw...Ch. 7 - All of the following statements regarding...Ch. 7 - Amalgamated Manipulation Manufacturings (AMM)...Ch. 7 - Atlantic Company has a manufacturing facility in...Ch. 7 - Basix Inc. calculates direct manufacturing labor...Ch. 7 - Flexible budget. Sweeney Enterprises manufactures...Ch. 7 - Flexible budget. Bryant Companys budgeted prices...Ch. 7 - Flexible-budget preparation and analysis. Bank...Ch. 7 - Flexible budget, working backward. The Clarkson...Ch. 7 - Flexible-budget and sales volume variances....Ch. 7 - Price and efficiency variances. Sunshine Foods...Ch. 7 - Materials and manufacturing labor variances....Ch. 7 - Direct materials and direct manufacturing labor...Ch. 7 - Price and efficiency variances, journal entries....Ch. 7 - Materials and manufacturing labor variances,...Ch. 7 - Journal entries and T-accounts (continuation of...Ch. 7 - Price and efficiency variances, benchmarking....Ch. 7 - Static and flexible budgets, service sector....Ch. 7 - Flexible budget, direct materials, and direct...Ch. 7 - Variance analysis, nonmanufacturing setting. Joyce...Ch. 7 - Comprehensive variance analysis review. Ellis...Ch. 7 - Possible causes for price and efficiency...Ch. 7 - Material-cost variances, use of variances for...Ch. 7 - Direct manufacturing labor and direct materials...Ch. 7 - Direct materials efficiency, mix, and yield...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Use of materials and manufacturing labor variances...Ch. 7 - Direct manufacturing labor variances: price,...Ch. 7 - Direct-cost and selling price variances. MicroDisk...Ch. 7 - Variances in the service sector. Derek Wilson...Ch. 7 - Prob. 7.47P
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