Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 7, Problem 7.23E
Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer’s bank. The company’s operating budget for September 2017 included these data:
| Number of checkbooks | 15,000 |
| Selling price per book | $ 20 |
| Variable cost per book | $ 8 |
| Fixed costs for the month | $145,000 |
The actual results for September 2017 were as follows:
| Number of checkbooks produced and sold | 12,000 |
| Average selling price per book | $ 21 |
| Variable cost per book | $ 7 |
| Fixed costs for the month | $150,000 |
The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company’s
Bank Management develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs.
- 1. Prepare a static-
budget-based variance analysis of the September performance.
Required
- 2. Prepare a flexible-budget-based variance analysis of the September performance.
- 3. Why might Bank Management find the flexible-budget-based variance analysis more informative than the static-budget-based variance analysis? Explain your answer.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Bank Assistant
Printers, Inc. produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget for September
2020
included these data:
LOADING...
(Click
the icon to view the operating budget and actual results.)
The company's executive vice president observed that the September operating income was much lower than anticipated despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to explain the disappointing September results.
Bank Assistant
develops its flexible budget based on budgeted per-output-unit revenue and per-output-unit variable costs without a detailed analysis of budgeted inputs.
The budgeted amounts for September
2020
were:
Number of checkbooks
20,000
Selling price per book
$25
Variable cost per book
$6…
ank Assistant
Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget for September
2020
included these data:
The budgeted amounts for September
2020
were:
Number of checkbooks
20,000
Selling price per book
$25
Variable cost per book
$6
Fixed costs for the month
$125,000
The actual results for September
2020
were as follows:
Number of checkbooks produced and sold
16,900
Average selling price per book
$27
Variable cost per book
$5
Fixed costs for the month
$131,000
Prepare a static-budget-based variance analysis of the September performance.
Begin with the actual results, then compute the static budget and the static-budget variances. Label each variance as favorable or unfavorable.?
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs…
Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer’s bank. The company’s operating budget for September 2017 included these data:
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?arrow_forwardBank Assistant Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the customer's bank. The company's operating budget for September 2020 included these data: LOADING... (Click the icon to view the operating budget and actual results.) The executive vice president of the company observed that the operating income for September was much lower than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. As the company's management accountant, you have been asked to provide explanations for the disappointing September results. Bank Assistant develops its flexible budget on the basis of budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs. The budgeted amounts for September 2020 were: Number of checkbooks 20,000 Selling price per book $25…arrow_forwardRequired The actual results for September 2017 were as follows: books with three checks and stubs per page. Each checkbook is designed for an individual customer and is 7-23 Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury check- Ce report that uses a flexible budget and is a static budget. 23 Hexe Cchecks and stubs per page. Each checkbook is designed for an individual customer and is ardered through the customer's bank. The company's operating budget for September 2017 included these data: ere will be 3 of May with 1,000 pounds ard costs at Number of checkbooks 15,000 Selling price per book $ 20 $ 8 Variable cost per book Fixed costs for the month $145,000 Number of checkbooks produced and sold 12,000 oment for ine: Average selling price per book Variable cost per book $ $ 21 2$ 7. Fixed costs for the month $150,000 The executive vice president of the company observed that the operating income for September was much Iower than anticipated,…arrow_forward
- Major Landscaping Company is preparing its budget for the first quarter of 2017. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients usually pay 60% of their fee in the month that service is provided, 30% the month after, and 10% the second month after receiving service. Actual service revenue for 2016 and expected service revenues for 2017 are: November 2016, $120,000; December 2016, $110,000; January 2017, $140,000; February 2017, $160,000; March 2017, $170,000. Purchases on landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2016 and expected purchases for 2017 are: December 2016, $21,000; January 2017, $20,000; February 2017, $22,000; March 2017, $27,000. Instructions Prepare the following schedules for each month in the first quarter of 2017 and for the quarter in total: Expected…arrow_forwardDirection: Read and understand the case below and continue to fill in the sales budget table. 1. XYZ Merchandising, which is engaged in the reselling of branded bags, is in the process of preparing its budgets for the calendar year 2016. Last year, XYZ was able to sell 1,500 bags with a selling price of 2,500 per bag. For the current year, the basis of both external and internal information. First quarter sales expected to be 400 bags. The firm also expects that unit sales per quarter would increase by 10%. Selling price is also expected to increase by 5% for 2016. XYZ Merchandising Sales Budget For the year ended December 31, 2016 1st quarter Ex. 400 2ad quarter 3rd quarter 4th quarter Total Expected Sales in Units Unit Sales price Total Sales 2,625 1,050,000arrow_forwardHASF Inc a distributor of cosmetics throughout Karachi, is in the process of assembling a cash budget for the first quarter 2015 the following information has been extracted from the company s’ accounting records All sales divided in equal part between cash and credit sales. 40 % of credit sales are collected in the month of sales 50% are collected in the following month and remaining is uncollectible. Management believes that only 40% of the a/c receivable outstanding on December 2014 will be recovered that the recovery will be in January 2015 50% of Purchase are paid for in the month of purchase the remaining 50% are paid for in the month after acquisition The December 31 2014 balance sheet disclosed the following selected figures cash 10,000 a/c receivable 75,000 and a/c payable 22,000 Company Maintains a 20,000 minimum cash balance at all time. Financing is available in 1,000 multiples at an 4% interest rate interest is paid ate the time of repaying principle. Additional date…arrow_forward
- Example 1: Purchases Budget Problem for Retailing Concern. Note that the format shown here is the same as would be used for the production and materials purchases budgets for a manufacturing concern. Lair Company is a retailer of leather handbags. The handbags are imported and are sometimes difficult to obtain on short notice. Therefore, the managers want to have 40% of the next month's estimated sales on hand at the end of the month. The Company's sales budget for the first quarter follows: Dollars Units January $200,000 2,000 February 240,000 2,400 March 300,000 3,000 The handbags cost $80 each and sell for $100. Prepare a purchases budget for February.arrow_forwardColter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: January February Sales $417,600 $464,000 Direct materials purchases 139,200 145,000 Direct labor 104,400 116,000 Manufacturing overhead 81,200 87,000 Selling and administrative expenses 91,640 98,600 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,160 of depreciation per month.Other data: 1. Credit sales: November 2016, $290,000 ; December 2016, $371,200. 2. Purchases of direct materials: December 2016, $116,000. 3. Other…arrow_forwardWellness Products, needs a cash budget for September. The following information is available: 1. The cash balance at the beginning of August is 9,000€. 2. Contribution margin is 50% (COGS are 50% of sales) 3. Actual sales for July and expected sales for August, September and October are as shown below. Some customers pay in cash (Cash sales) and others in account as described in the figure below. Customers that pay in account, make the payment the month after. 4. Purchases of inventory (company just resells what they buy) must be done so that the end of month inventory must cover 20% of next month sales. Initial inventory in July was 5.300€. 100% of a month's inventory purchases are paid for during the month of purchase. 1. Prepare a schedule of expected cash collections for August, September & October. 2. Prepare a merchandise purchases budget for July, August, and September. 3. Prepare a schedule of expected cash flow (cash in minus cash out) for August, and September. Cash Sales…arrow_forward
- Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s management accountant gathered the following data to prepare budgets for January 2018: Materials and Labor Requirement Direct Materials Wood 9 Boards Feet (b.f.) per snowboard Fiberglass 10 Yards per snowboard Direct manufacturing labor 5 hours per snowboard Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock. Direct Materials Inventories Begining Inventory 1/1/2018 Ending Inventory 1/31/2018 Wood 2,040 b.f. 1,540 b.f. Fiberglass 1,040 yards 2,040 yards Alternative…arrow_forwardComprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s management accountant gathered the following data to prepare budgets for January 2018: Materials and Labor Requirement Direct Materials Wood 9 Boards Feet (b.f.) per snowboard Fiberglass 10 Yards per snowboard Direct manufacturing labor 5 hours per snowboard Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock. Direct Materials Inventories Begining Inventory 1/1/2018 Ending Inventory 1/31/2018 Wood 2,040 b.f. 1,540 b.f. Fiberglass 1,040 yards 2,040 yards Alternative…arrow_forwardComprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s management accountant gathered the following data to prepare budgets for January 2018: Materials and Labor Requirement Direct Materials Wood 9 Boards Feet (b.f.) per snowboard Fiberglass 10 Yards per snowboard Direct manufacturing labor 5 hours per snowboard Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock. Direct Materials Inventories Begining Inventory 1/1/2018 Ending Inventory 1/31/2018 Wood 2,040 b.f. 1,540 b.f. Fiberglass 1,040 yards 2,040 yards Alternative…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY