Managerial Accounting 1B

Financial

and Managerial Accounting

Chapter 21

1.Exercise 21-1 Preparation of flexible budgets

L.O. P1

Mesa Company’s fixed budget for

the first quarter of calendar year 2011 reveals the following.

Prepare flexible budgets that show

variable costs per unit, fixed costs, and three different flexible budgets

for sales volumes of 7,500, 10,000, and 12,500 units. (Round your “Variable amount per unit” to 2

decimal places. Input all amounts as positive values. Omit the

“$” sign in your response.)

MESA COMPANY

Flexible Budgets

For Quarter Ended March 31, 2011

Flexible

Budget

2.

Exercise 21-4

Preparation of a flexible budget performance report L.O. P1

Daytec Companys fixed budget

performance report for June follows. The $440,000 budgeted expenses include

$300,000 variable expenses and $140,000 fixed expenses. Actual expenses

include $130,000 fixed expenses.

Prepare a flexible budget

performance report showing any variances between budgeted and actual results.

List fixed and variable expenses separately. (Input

all amounts as a positive value. Indicate the effect of each variance by

selecting “F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells blank –

be certain to enter “0” wherever required. Omit the “$”

sign in your response.)

Exercise 21-7A

Computation and interpretation of overhead spending, efficiency, and volume

variances L.O. P3

[The following information applies to the questions displayed

below.]

Sonic Company set the following

standard costs for one unit of its product for 2011.

The $3.00 ($2.50 + $0.50) total

overhead rate per direct labor hour is based on an expected operating level

equal to 75% of the factory’s capacity of 50,000 units per month. The

following monthly flexible budget information is also available.

During the current month, the

company operated at 70% of capacity, employees worked 500,000 hours, and the

following actual overhead costs were incurred.

3.

Exercise 21-7 Part 1

1.

Compute variable overhead spending

and efficiency variances.(Input all amounts

as a positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells

blank – be certain to enter “0” wherever required. Omit the

“$” sign in your response.)

Spending variances

$

U

Efficiency variances

$

F

4.

Exercise 21-7 Part 2

2.

Compute Fixed overhead spending

and volume variances.(Input all amounts as a

positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells

blank – be certain to enter “0” wherever required. Omit the

“$” sign in your response.)

Spending variances

$

U

Volume variances

$

U

5.Exercise 21-7 Part 3

3.

Compute controllable

variance.(Input all amounts as a positive

value. Indicate the effect of each variance by selecting “F” for

favorable, “U” for unfavorable, and “None” for no effect

(i.e., zero variance). Leave no cells blank – be certain to enter “0”

wherever required. Omit the “$” sign in your response.)

Controllable variance

$

F

6.Exercise 21-8 Computation and interpretation

of materials variances L.O. P2

BTS Company made 6,000 bookshelves

using 88,000 board feet of wood costing $607,200. The companys direct

materials standards for one bookshelf are 16 board feet of wood at $7 per

board foot.

(1)

Compute the direct materials

variances incurred in manufacturing these bookshelves. (Do not round your intermediate calculations. Input all amounts

as a positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells blank

– be certain to enter “0” wherever required. Omit the “$”

sign in your response.)

Problem 21-1A

Computation of materials, labor, and overhead variances L.O. P2, P3

[The following information applies to the questions displayed

below.]

Tuna Company set the following

standard unit costs for its single product.

The predetermined overhead rate is

based on a planned operating volume of 80% of the productive capacity of

60,000 units per quarter. The following flexible budget information is

available.

During the current quarter, the

company operated at 70% of capacity and produced 42,000 units of product;

actual direct labor totaled 250,000 hours. Units produced were assigned the

following standard costs:

Actual costs incurred during the

current quarter follow:

7.Problem 21-1A Part 1

Required:

1.

Compute the direct materials cost

variance, including its price and quantity variances.(Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Input all amounts as

positive values. Leave no cells blank – be certain to enter “0”

wherever required. Omit the “$” sign in your response.)

8.

Problem 21-1A Part 2

2.

Compute the direct labor variance,

including its rate and efficiency variances.(Indicate

the effect of each variance by selecting “F” for favorable,

“U” for unfavorable, and “None” for no effect (i.e., zero

variance). Input all amounts as positive values. Leave no cells blank – be

certain to enter “0” wherever required. Omit the “$” sign

in your response.)

9.Problem 21-1A Part 3

3.

Compute the overhead controllable

and volume variances.(Indicate the effect of

each variance by selecting “F” for favorable, “U” for

unfavorable, and “None” for no effect (i.e., zero variance). Input

all amounts as positive values. Leave no cells blank – be certain to enter

“0” wherever required. Omit the “$” sign in your response.)

Controllable variance

$

Fixed overhead volume

variance

$

Problem 21-3A

Preparation and analysis of a flexible budget L.O. P1

[The following information applies to the questions displayed

below.]

Pebco Companys 2011 master budget

included the following fixed budget report. It is based on an expected

production and sales volume of 20,000 units.

PEBCO

COMPANY

Fixed Budget Report

For Year Ended December 31, 2011

10.Problem 21-3A Part 1

1.

Classify all items listed in the

fixed budget as variable or fixed. Also determine their amounts per unit or

their amounts for the year, as appropriate. (Round

your variable amount answers to 2 decimal places. Omit the “$”

sign in your response.)

11.Problem 21-3A Part 2

2.

Prepare flexible budgets for the

company at sales volumes of 18,000 and 24,000 units.(Round your variable

amount per unit answers to 2 decimal places. Input all

amounts as positive values. Omit the “$” sign in your response.)

PEBCO COMPANY

Flexible

Budgets

For Year

Ended December 31, 2011

12.Problem 21-3A Part 3

3.

The companys business conditions

are improving. One possible result is a sales volume of approximately 28,000

units. The company president is confident that this volume is within the

relevant range of existing capacity. How much would operating income increase

over the 2011 budgeted amount of $125,000 if this level is reached without

increasing capacity?(Do not round

intermediate calculations.Omit the “$” sign in your response.)

Operating income

increase

$

13.Problem 21-3A Part 4

4.

An unfavorable change in business

is remotely possible; in this case, production and sales volume for 2011

could fall to 14,000 units. How much income (or loss) from operations would

occur if sales volume falls to this level?(Input

the amount as positive value. Do not round intermediate

calculations.Omit the “$” sign in your response.)

Potential operating

loss

$

Explanation:

Operating income (loss) at 14,000

units

Managerial Accounting 1BFinancial

and Managerial AccountingChapter 21 1.Exercise 21-1 Preparation of flexible budgets

L.O. P1Mesa Company’s fixed budget for

the first quarter of calendar year 2011 reveals the following.Prepare flexible budgets that show

variable costs per unit, fixed costs, and three different flexible budgets

for sales volumes of 7,500, 10,000, and 12,500 units. (Round your “Variable amount per unit” to 2

decimal places. Input all amounts as positive values. Omit the

“$” sign in your response.)MESA COMPANY

Flexible Budgets

For Quarter Ended March 31, 2011 Flexible

Budget 2.Exercise 21-4

Preparation of a flexible budget performance report L.O. P1Daytec Companys fixed budget

performance report for June follows. The $440,000 budgeted expenses include

$300,000 variable expenses and $140,000 fixed expenses. Actual expenses

include $130,000 fixed expenses.Prepare a flexible budget

performance report showing any variances between budgeted and actual results.

List fixed and variable expenses separately. (Input

all amounts as a positive value. Indicate the effect of each variance by

selecting “F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells blank –

be certain to enter “0” wherever required. Omit the “$”

sign in your response.)

Exercise 21-7A

Computation and interpretation of overhead spending, efficiency, and volume

variances L.O. P3[The following information applies to the questions displayed

below.]Sonic Company set the following

standard costs for one unit of its product for 2011.

The $3.00 ($2.50 + $0.50) total

overhead rate per direct labor hour is based on an expected operating level

equal to 75% of the factory’s capacity of 50,000 units per month. The

following monthly flexible budget information is also available.During the current month, the

company operated at 70% of capacity, employees worked 500,000 hours, and the

following actual overhead costs were incurred. 3.Exercise 21-7 Part 11.Compute variable overhead spending

and efficiency variances.(Input all amounts

as a positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells

blank – be certain to enter “0” wherever required. Omit the

“$” sign in your response.) Spending variances$ U Efficiency variances$ F

4.Exercise 21-7 Part 22.Compute Fixed overhead spending

and volume variances.(Input all amounts as a

positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells

blank – be certain to enter “0” wherever required. Omit the

“$” sign in your response.) Spending variances$ U Volume variances$ U

5.Exercise 21-7 Part 33.Compute controllable

variance.(Input all amounts as a positive

value. Indicate the effect of each variance by selecting “F” for

favorable, “U” for unfavorable, and “None” for no effect

(i.e., zero variance). Leave no cells blank – be certain to enter “0”

wherever required. Omit the “$” sign in your response.) Controllable variance$ F

6.Exercise 21-8 Computation and interpretation

of materials variances L.O. P2BTS Company made 6,000 bookshelves

using 88,000 board feet of wood costing $607,200. The companys direct

materials standards for one bookshelf are 16 board feet of wood at $7 per

board foot. (1)Compute the direct materials

variances incurred in manufacturing these bookshelves. (Do not round your intermediate calculations. Input all amounts

as a positive value. Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Leave no cells blank

– be certain to enter “0” wherever required. Omit the “$”

sign in your response.)

Problem 21-1A

Computation of materials, labor, and overhead variances L.O. P2, P3[The following information applies to the questions displayed

below.]Tuna Company set the following

standard unit costs for its single product. The predetermined overhead rate is

based on a planned operating volume of 80% of the productive capacity of

60,000 units per quarter. The following flexible budget information is

available. During the current quarter, the

company operated at 70% of capacity and produced 42,000 units of product;

actual direct labor totaled 250,000 hours. Units produced were assigned the

following standard costs: Actual costs incurred during the

current quarter follow:7.Problem 21-1A Part 1Required:1.Compute the direct materials cost

variance, including its price and quantity variances.(Indicate the effect of each variance by selecting

“F” for favorable, “U” for unfavorable, and

“None” for no effect (i.e., zero variance). Input all amounts as

positive values. Leave no cells blank – be certain to enter “0”

wherever required. Omit the “$” sign in your response.) 8.Problem 21-1A Part 22.Compute the direct labor variance,

including its rate and efficiency variances.(Indicate

the effect of each variance by selecting “F” for favorable,

“U” for unfavorable, and “None” for no effect (i.e., zero

variance). Input all amounts as positive values. Leave no cells blank – be

certain to enter “0” wherever required. Omit the “$” sign

in your response.)9.Problem 21-1A Part 33.Compute the overhead controllable

and volume variances.(Indicate the effect of

each variance by selecting “F” for favorable, “U” for

unfavorable, and “None” for no effect (i.e., zero variance). Input

all amounts as positive values. Leave no cells blank – be certain to enter

“0” wherever required. Omit the “$” sign in your response.) Controllable variance$ Fixed overhead volume

variance$

Problem 21-3A

Preparation and analysis of a flexible budget L.O. P1[The following information applies to the questions displayed

below.]Pebco Companys 2011 master budget

included the following fixed budget report. It is based on an expected

production and sales volume of 20,000 units. PEBCO

COMPANY

Fixed Budget Report

For Year Ended December 31, 2011 10.Problem 21-3A Part 11.Classify all items listed in the

fixed budget as variable or fixed. Also determine their amounts per unit or

their amounts for the year, as appropriate. (Round

your variable amount answers to 2 decimal places. Omit the “$”

sign in your response.)

11.Problem 21-3A Part 22.Prepare flexible budgets for the

company at sales volumes of 18,000 and 24,000 units.(Round your variable

amount per unit answers to 2 decimal places. Input all

amounts as positive values. Omit the “$” sign in your response.)PEBCO COMPANYFlexible

BudgetsFor Year

Ended December 31, 2011

12.Problem 21-3A Part 33.The companys business conditions

are improving. One possible result is a sales volume of approximately 28,000

units. The company president is confident that this volume is within the

relevant range of existing capacity. How much would operating income increase

over the 2011 budgeted amount of $125,000 if this level is reached without

increasing capacity?(Do not round

intermediate calculations.Omit the “$” sign in your response.) Operating income

increase$

13.Problem 21-3A Part 44.An unfavorable change in business

is remotely possible; in this case, production and sales volume for 2011

could fall to 14,000 units. How much income (or loss) from operations would

occur if sales volume falls to this level?(Input

the amount as positive value. Do not round intermediate

calculations.Omit the “$” sign in your response.) Potential operating

loss$

Explanation:Operating income (loss) at 14,000

units