- Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,100 pounds of oysters in August. The company's flexible budget for August appears below:
Quilcene Oysteria
Flexible Budget
For the Month Ended August 31
Actual pounds (q) 7,100
Revenue ($4.20q) $ 29,820
Expenses:
Packing supplies ($0.30q) 2,130
Oyster bed maintenance ($3,400) 3,400
Wages and salaries ($2,500 + $0.35q) 4,985
Shipping ($0.70q) 4,970
Utilities ($1,250) 1,250
Other ($480 + $0.01q) 551
Total expense 17,286
Net operating income $ 12,534
The actual results for August appear below:
Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds 7,100
Revenue $ 27,300
Expenses:
Packing supplies 2,300
Oyster bed maintenance 3,260
Wages and salaries 5,395
Shipping 4,700
Utilities 1,060
Other 1,171
Total expense 17,886
Net operating income $ 9,414
Required:
Compute the company's revenue and spending variances for August.
Revenue $2,520 U
Expenses:
Packing supplies 170 U
Oyster bed maintenance 140 F
Wages and salaries 410 U
Shipping 270 F
Utilities 190 F
Other 620 U
Total expense 600 U
Net operating income $3,120 U
Explanation:
Pounds 7,100 7,100
Revenue ($4.20q) $ 27,300 $ 29,820 $ 2,520 U
Expenses:
Packing supplies ($0.30q) 2,300 2,130 170 U
Oyster bed maintenance ($3,400) 3,260 3,400 140 F
Wages and salaries ($2,500 + $0.35q) 5,395 4,985 410 U
Shipping ($0.70q) 4,700 4,970 270 F
Utilities ($1,250) 1,060 1,250 190 F
Other ($480 + $0.01q) 1,171 551 620 U
Total expense 17,886 17,286 600 U
Net operating income $ 9,414 $ 12,534 $ 3,120 U
- Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company's operations in July appear below:
Vulcan Flyovers
Operating Data
For the Month Ended July 31
Actual
Results Flexible
Budget Planning
Budget
Flights (q) 52 52 50
Revenue ($355.00q) $ 16,000 $ 18,460 $ 17,750
Expenses:
Wages and salaries ($3,700 + $87.00q) 8,190 8,224 8,050
Fuel ($31.00q) 1,780 1,612 1,550
Airport fees ($860 + $33.00q) 2,446 2,576 2,510
Aircraft depreciation ($9.00q) 468 468 450
Office expenses ($210 + $1.00q) 430 262 260
Total expense 13,314 13,142 12,820
Net operating income $ 2,686 $ 5,318 $ 4,930
The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.
Required:
1. Complete the flexible budget performance report abstract for July.
Revenue $2,460 U $710 F
Expenses:
Wages and salaries 34 F 174 U
Fuel 168 U 62 U
Airport fees 130 F 66 U
Aircraft depreciation None 18 U
Office expenses 168 U 2 U
Total expense 172 U 322 U
Net operating income $2,632 U $388 F
Explanation:
Vulcan Flyovers
Flexible Budget Performance Report
For the Month Ended July 31
Actual Results Revenue and Spending Variances Flexible Budget Activity
Variances Planning
Budget
Flights (q) 52 52 50
Revenue ($355.00q) $ 16,000 $ 2,460 U $ 18,460 $ 710 F $ 17,750
Expenses:
Wages and salaries ($3,700 + $87.00q) 8,190 34 F 8,224 174 U 8,050
Fuel ($31.00q) 1,780 168 U 1,612 62 U 1,550
Airport fees ($860 + $33.00q) 2,446 130 F 2,576 66 U 2,510
Aircraft depreciation ($9.00q) 468 0 None 468 18 U 450
Office expenses ($210 + $1.00q) 430 168 U 262 2 U 260
Total expense 13,314 172 U 13,142 322 U 12,820
Net operating income $ 2,686 $ 2,632 U $ 5,318 $ 388 F $ 4,930
- Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 82 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below:
Fixed Cost
per Month Cost per
Cruise Cost per
Passenger
Vessel operating costs $ 6,000 $ 473.00 $ 3.30
Advertising $ 2,700
Administrative costs $ 5,900 $ 32.00 $ 1.50
Insurance $ 3,700
For example, vessel operating costs should be $6,000 per month plus $473.00 per cruise plus $3.30 per passenger. The company's sales should average $32.00 per passenger. The company's planning budget for July is based on 50 cruises and 3,100 passengers.
Required:
Complete the company's planning budget for July.
Revenue $99,200
Expenses:
Vessel operating costs 39,880
Advertising 2,700
Administrative costs 12,150
Insurance 3,700
Total expense 58,430
Net operating income $40,770
Explanation:
Revenue ($32.00 × 3,100) = $99,200
Vessel operating costs ($6,000 + ($473.00 × 50) + ($3.30 × 3,100)) = $39,880
Administrative costs ($5,900 + ($32.00 × 50) + ($1.50 × 3,100)) = $12,150
- Waste on the production line will result in an unfavorable materials quantity variance.
True
- Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:
unfavorable
- The standard price per unit for direct materials should not include the cost of delivering the materials.
False
- A materials price variance is unfavorable if the actual price exceeds the standard price.
True
- The materials price variance is computed by multiplying the difference between the actual price and the standard price by the actual quantity of materials purchased.
True
- Asia Sporting Industries, located in Hong Kong, manufactures sporting equipment. A major seller for the company, a football helmet for the Texas market, requires a very hard special plastic. During the quarter ending March 31, the company manufactured 3,300 helmets, using 2,310 kilograms of plastic. The plastic cost the company $17,556.
Based on the company's standard cost card for the helmet, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.
Required:
1. According to the standards, what would be the total standard cost of plastic that should have been incurred to make 3,300 helmets? How much greater or less is this than the cost that was incurred?
Number of Helmets: 3300
Standard kg of plastic/helmet: .6
Total standard kg allowed: 1980
Standard cost per kg: $8
Total Standard Cost: $15840
Actual cost incurred: $17556
Total standard cost: $15840
Total material variance: $1716 unfavorable
- Asia Sporting Industries, located in Hong Kong, manufactures sporting equipment. A major seller for the company, a football helmet for the Texas market, requires a very hard special plastic. During the quarter ending March 31, the company manufactured 3,300 helmets, using 2,310 kilograms of plastic. The plastic cost the company $17,556.
Based on the company's standard cost card for the helmet, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.
2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance. (Round your actual materials price to two decimal places, and round your final answers to the nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Materials price variance: $924
Materials quantity variance: $2640
Explanation:
2.
Actual Quantity of Input, at
Actual Price Actual Quantity of Input,
at Standard Price Standard Quantity
Allowed for Output, at
Standard Price
(AQ × AP)
(AQ × SP)
(SQ × SP)
2,310 kilograms ×
$8.00 per kilogram 1,980 kilograms* ×
$8.00 per kilogram
$17,556 = $18,480 = $15,840
Price Variance,
$924 F
Quantity Variance,
$2,640 U
Spending Variance,
$1,716 U
*3,300 helmets × 0.60 kilograms per helmet = 1,980 kilograms
Alternatively, the variances can be computed using the formulas:
Materials price variance = AQ (AP - SP)
2,310 kilograms ($7.60 per kilogram* - $8.00 per kilogram)
= $924 F
* $17,556 ÷ 2,310 kilograms = $7.60 per kilogram
Materials quantity variance = SP (AQ - SQ)
$8.00 per kilogram (2,310 kilograms - 1,980 kilograms)
= $2,640 U
