Preparation and analysis of a flexible budget

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In this assignment, you will focus on the preparation and analysis of a flexible budget.

Use an Excel worksheet to complete the following in your Financial and Managerial Accounting textbook:

  • Problem 21-1B, page 979.

There is no template for this assignment.

Problem 21-1B Preparation and analysis of a flexible budget P1 A1

Tohono Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 20,000 units.

Required

  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.
  2. Prepare flexible budgets (see Exhibit 21.3) for the company at sales volumes of 18,000 and 24,000 units. Check (2) Budgeted income at 24,000 units, $372,400
  3. The company’s business conditions are improving. One possible result is a sales volume of 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 2017 budgeted amount of $125,000 if this level is reached without increasing capacity?
  4. An unfavorable change in business is remotely possible; in this case, production and sales volume for 2017 could fall to 14,000 units. How much income (or loss) from operations would occur if sales volume falls to this level? (4) Potential operating loss, $(246,100)

 

Use either a Word document or an Excel spreadsheet to complete the following in your Financial and Managerial Accounting textbook:

  • Problem 21-4B, page 981.

There is no template for this assignment.

Problem 21-4B Computation of materials, labor, and overhead variances P2 P3

Kryll 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; direct labor hours worked were 250,000. Units produced were assigned the following standard costs:

Actual costs incurred during the current quarter follow.

Required

  1. Compute the direct materials cost variance, including its price and quantity variances. Check (1) Materials variances: Price, $250,000 U; Quantity, $200,000 F;
  2. Compute the direct labor cost variance, including its rate and efficiency variances. (2) Labor variances: Rate, $62,500 F; Efficiency, $16,000 F
  3. Compute the total overhead controllable and volume variances.

 

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