Exercise 1 7 direct and indirect costs lo1 1

W7 Assignment

Complete homework exercises in Word or Excel.

Chapter 10: Exercises 1, 2, 3, 4

Chapter 11: Exercises 1, 2, 3, 8

EXERCISE 10–1 Prepare a Flexible Budget [LO 10–1]

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:

Puget Sound Divers Planning Budget For the Month Ended May 31

Budgeted diving-hours (q). . . . . . . . . . . . . . . . . . .

100

Revenue ($365.00q). . . . . . . . . . . . . . . . . . . . . . .

$36,500

Expenses:

 Wages and salaries ($8,000 + $125.00q) . . . . . .

20,500

 Supplies ($3.00q). . . . . . . . . . . . . . . . . . . . . . .

300

 Equipment rental ($1,800 + $32.00q) . . . . . . . .

5,000

 Insurance ($3,400). . . . . . . . . . . . . . . . . . . . . .

3,400

 Miscellaneous ($630 + $1.80q). . . . . . . . . . . . . .

810

Total expense. . . . . . . . . . . . . . . . . . . . . . . . . . .

30,010

Net operating income. . . . . . . . . . . . . . . . . . . . . .

$ 6,490

Required:

During May, the company’s activity was actually 105 diving-hours. Prepare a flexible budget for that level of activity.

EXERCISE 10–2 Prepare a Report Showing Activity Variances [LO 10–2]

Flight Cafe; is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below:

Flight Café Planning Budget For the Month Ended July 31

Budgeted meals (q). . . . . . . . . . . . . . . . . . . . . . . .

18,000

Revenue ($4.50q) . . . . . . . . . . . . . . . . . . . . . . . . .

$ 81,000

Expenses:

 Raw materials ($2.40q). . . . . . . . . . . . . . . . . . . .

43,200

 Wages and salaries ($5,200 + $0. 30q) . . . . . . . .

10,600

 Utilities ($2,400 + $0. 05q). . . . . . . . . . . . . . . . .

3,300

 Facility rent ($4,300). . . . . . . . . . . . . . . . . . . . . .

4,300

 Insurance ($2,300). . . . . . . . . . . . . . . . . . . . . . .

2,300

 Miscellaneous ($680 + $0. 10q). . . . . . . . . . . . . .

2,480

Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66,180

Net operating income. . . . . . . . . . . . . . . . . . . . . . .

$ 14,820

In July, 17,800 meals were actually served. The company’s flexible budget for this level of activity appears below:

Flight Café Flexible Budget For the Month Ended July 31

Budgeted meals (q). . . . . . . . . . . . . . . . . . . . . . . .

17,800

Revenue ($4. 50q). . . . . . . . . . . . . . . . . . . . . . . . .

$80,100

Expenses:

 Raw materials ($2. 40q). . . . . . . . . . . . . . . . . . .

42,720

 Wages and salaries ($5,200 + $0. 30q). . . . . . . .

10,540

 Utilities ($2,400 + $0. 05q). . . . . . . . . . . . . . . . .

3,290

 Facility rent ($4,300). . . . . . . . . . . . . . . . . . . . . .

4,300

 Insurance ($2,300). . . . . . . . . . . . . . . . . . . . . . .

2,300

 Miscellaneous ($680 + $0. 10q). . . . . . . . . . . . . .

2,460

Total expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,610

Net operating income. . . . . . . . . . . . . . . . . . . . . . .

$14,490

Page 460

Required:

1. Prepare a report showing the company’s activity variances for July.

2. Which of the activity variances should be of concern to management? Explain.

EXERCISE 10–3 Prepare a Report Showing Revenue and Spending Variances [LO 10–3]

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 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). . . . . . . . . . . . . . . . . . . . . . . .

8,000

Revenue ($4. 00q). . . . . . . . . . . . . . . . . . . . . . . .

$32,000

Expenses:

Packing supplies ($0. 50q). . . . . . . . . . . . . . .

4,000

Oyster bed maintenance ($3,200). . . . . .

3,200

Wages and salaries ($2,900 + $0. 30q)..

5,300

Shipping ($0.80q). . . . . . . . . . . . . . . . . . . . .

6,400

Utilities ($830). . . . . . . . . . . . . . . . . . . . . . . .

830

Other ($450 + $0. 05q). . . . . . . . . . . . . . . .

850

Total expense. . . . . . . . . . . . . . . . . . . . . . . . . . .

20,580

Net operating income. . . . . . . . . . . . . . . . . . .

$11,420

The actual results for August appear below:

Quilcene Oysteria Income Statement For the Month Ended August 31

Actual pounds. . . . . . . . . . . . . . . . . . . . . . . . . . .

8,000

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,200

Expenses:

 Packing supplies. . . . . . . . . . . . . . . . . . . . . . .

4,200

 Oyster bed maintenance. . . . . . . . . . . . . . . . .

3,100

 Wages and salaries . . . . . . . . . . . . . . . . . . . .

5,640

 Shipping. . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,950

 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

810

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

980

Total expense. . . . . . . . . . . . . . . . . . . . . . . . .

21,680

Net operating income. . . . . . . . . . . . . . . . . . . .

$13,520

Required:

Prepare a report showing the company’s revenue and spending variances for August.

EXERCISE 10–4 Prepare a Flexible Budget Performance Report [LO 10–4]

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:

Page 461

Vulcan Flyovers Operating Data For the Month Ended July 31

Actual Results

Flexible Budget

Planning Budget

Flights (q). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48

48

50

Revenue ($320.00q) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,650

$15,360

$16,000

Expenses:

 Wages and salaries ($4,000 + $82.00q). . . . . . . . . . . . . . . . . .

8,430

7,936

8,100

 Fuel ($23.00q) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,260

1,104

1,150

 Airport fees ($650 + $38.00q). . . . . . . . . . . . . . . . . . . . . . . . .

2,350

2,474

2,550

 Aircraft depreciation ($7. 00q). . . . . . . . . . . . . . . . . . . . . . . . .

336

336

350

 Office expenses ($190 + $2. 00q). . . . . . . . . . . . . . . . . . . . . . .

460

286

290

Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,836

12,136

12,440

Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 814

$ 3,224

$ 3,