1.
Introduction:
Variance:
Variance refers to the difference between planned and actual performance which represents the overall positive or negative output or performance of the company.
Whether the owner should feel frustrated with the variance report.
2.
Introduction:
Flexible budget performance report:
Under a flexible budget, to compare the actual performance (revenues and costs) with the budgeted performance (revenues and costs) a flexible budget performance report is used by a business enterprise at several levels of activity.
To Prepare: The Flexible Budget Performance Report for school for the month of July.
3.
Introduction:
Variance:
Variance refers to the difference between planned and actual performance which represents the overall positive or negative output or performance of the company.
To evaluate: The performance of the school for the month of July.
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MANAGERIAL ACCOUNTING FOR MANGER CONNEC
- TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: TipTop Flight SchoolVariance ReportFor the Month Ended July 31 ActualResults PlanningBudget Variances Lessons 145 140 Revenue $ 33,110 $ 32,200 $ 910 F Expenses: Instructor wages 8,510 8,400 110 U Aircraft depreciation 4,350 4,200 150 U Fuel 2,470 1,960 510 U Maintenance 2,010 1,900 110 U Ground facility expenses 1,465 1,480 15 F Administration 3,265 3,340 75 F Total expense 22,070 21,280 790 U Net operating income $ 11,040 $ 10,920 $ 120 F After several months of using such variance reports, the owner has become frustrated. For example,…arrow_forward(a) Al Khoud Training Center (KTC) is an industrial training company operating in Muscat Knowledge Oasis. Following increased competition and customer expectations, KTC has been forced to revisit its operational strategy and its quality standards. The following budgeted data for 2022 are available: Number of Trainees 5,500 Operating Income OMR24,000 Budgeted Variable Cost per Trainee Trainee's Support Service Training Materials Foods Budgeted Fixed Cost per Training 14,800 13,000 OMR16 Facilities OMR21 Salaries OMR20 OMR10 Miscellaneous Products & Services Based on the customer survey it conducted, KTC has learned that several improvements to its products and services are required. The improvements would provide the following impacts: Increase in the Number of Trainees 30% Increase in the Total Variable Costs 25% Increase in the Total Fixed Costs 25% You are required to: (1) Calculate the budgeted revenue per trainee based on the available data. (i) Assuming that budgeted revenue per…arrow_forwardUsing responsibility reports to evaluate cost, revenue, and profit centers The accountant for a subunit of Speed Sports Company went on vacation before completing the subunit’s monthly responsibility report. This is as far as she got: Requirements Complete the responsibility report for this subunit. Based on the data presented, what type of responsibility center is this Subunit. Which items should be investigated if part of management’s decision criteria is to investigate all variances exceeding $12,000?arrow_forward
- TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: Lessons Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Lessons Revenue Expenses: TipTop Flight School Variance Report For the Month Ended July 31 Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income Actual Results After several months of using these reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.…arrow_forwardTipTop Flight School offers flying lessons at a small municipal airport. The school's owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: Lessons Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income Revenue Instructor wages. Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Lessons Revenue TipTop Flight School Variance Report For the Month Ended July 31 Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income After several months of using these reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance. The planning…arrow_forwardThe Lockit Company manufactures door knobs for residential homes and apartments. Lockit is considering the use of simple (single-driver) and multiple regression analyses to forecast annual sales because previous forecasts have been inaccurate. The new sales forecast will be used to initiate the budgeting process and to identify more completely the underlying process that generates sales. Larry Husky, the controller of Lockit, has considered many possible independent variables and equations to predict sales and has narrowed his choices to four equations. Husky used annual observations from 20 prior years to estimate each of the four equations. Following are definitions of the variables used in the four equations and a statistical summary of these equations: St=ForecastedsalesindollarsforLockitinperiodtSt1=ActualsalesindollarsforLockitinperiodt1Gt=ForecastedU.S.grossdomesticproductinperiodtGt1=ActualU.S.grossdomesticproductinperiodt1Nt1=Lockitsnetincomeinperiodt1 Required: 1. Write Equations 2 and 4 in the form Y = a + bx. 2. If actual sales are 1,500,000 in the current year, what would be the forecasted sales for Lockit in the coming year? 3. Explain why Larry Husky might prefer Equation 3 to Equation 2. 4. Explain the advantages and disadvantages of using Equation 4 to forecast sales.arrow_forward
- 1. The Copy Center is a service department for the operating departments Foster School of Business, which includes the Accounting Department. Rates for usage of the Copy Center for the Accounting Department for 2020 are below: Fixed Cost $43,000 Budgeted Variable Cost $0.38 per page These budgeted costs are used to determine the transfer price that other departments will pay for their usage of the Copy Center Service Department. Due to an error in the budgeted the price of ink, the Copy Center service department now incurs a cost of $0.74 per page. How much should the Foster Accounting Department be charged for the year if it printed 500 copies during 2020? 2. Chipotle is deciding whether to continue making guacamole in the restaurant or buy it from an outside supplier. Chipotle's cost information is as follows (unit is a tub full of guacamole): Cost per Unit Direct Materials $9.78 Direct Labor $4.14 Variable Overhead $2.41 Worker Salary $6.59 Depreciation of…arrow_forwardAl Khoud Training Center (KTC) is an industrial training company operating in Muscat Knowledge Oasis. Following increased competition and customer expectations, KTC has been forced to revisit its operational strategy and its quality standards. The following budgeted data for 2022 are available: Number of Trainees 6,000 Operating Income OMR45,000 Budgeted Variable Cost per Trainee Trainee's Support Service Training Materials Foods Miscellaneous Products & Services OMR15 Budgeted Fixed Cost per Training 16,000 5,000 OMR26 Facilities OMR12 Salaries OMR22 Based on the customer survey it conducted, KTC has learned that several improvements to its products and services are required. The improvements would provide the following impacts: Increase in the Number of Trainees Increase in the Total Variable Costs Increase in the Total Fixed Costs 70% 65% 50% You are required to: (0) Calculate the budgeted revenue per trainee based on the available data. (i) Assuming that budgeted revenue per…arrow_forwardHoward Cooper, the president of Finch Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost. Expected fixed costs Facility maintenance Selling, general, and administrative Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Finch charges customers $57 per hour, the firm can achieve 31,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm…arrow_forward
- Check my work As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information regarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) Required: $ 100.00 63.00 1,227,327 1. What is the breakeven volume, in units and dollars, for the coming year? 2. Assume that the goal of the company is to earn a pretax (operating) profit of $332,001 for the coming year. How many units would the company have to sell to achieve this goal? 3. Assume that of the $63 variable cost per unit the labor-cost component is $29. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the…arrow_forwardalanced scorecard? they relate to prevention costs. xamples of nonfinancial perfor- sures. 24. Distinguish between internal and external fail- ure costs, and give two examples of each. EXERCISES Computing budgeted overhead rates James and Waymire have a professional service firm that has the following budgeted costs for the current year: E9-1 Associates' salaries $300,000 Depreciation-equipment....... 50,000 Fringe benefits 150,000 Lease expense 220,000 Partners' salaries. 200,000 Telephone and fax 30.000 Compute the budgeted overhead rate for the coming year, using direct labor dollars as the overhead allocation base. Computing profit or loss on a bid Sebastian and Whitley, plumbers, successfully bid $30,000 for the E9-2 ng work on a new homeTotalidiractilaarrow_forwardThe production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best average rate of return. Machine A Machine B Machine C $83,087.40 $73,001.40 322,364.00 276,958.00 486,676.00 Estimated average income $45,130.96 Average investment Oa. Machine B Ob. Machine C Oc. Machine A Od. Machines B and C have the same preferred average rate of return.arrow_forward
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