Puget sound divers is a company

Complete homework exercises in Word or Excel.

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:

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

$ 3,560

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. Prepare a flexible budget performance report for July.

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

EXERCISE 11–1 Direct Materials Variances [LO11–1]

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000.

According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.

Required:

1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?Page 499

2. Break down the difference computed in requirement 1 into a materials price variance and a materials quantity variance.

EXERCISE 11–2 Direct Labor Variances [LO11–2]

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labor-hours. The company paid these direct labor workers a total of $9,600 for this work, or $10.00 per hour.

According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour.

Required:

1. According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost?

2. Break down the difference computed in requirement 1 into a labor rate variance and a labor efficiency variance.

EXERCISE 11–3 Variable Overhead Variances [LO11–3]

Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.

In the most recent month, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs.

According to the company’s standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour.

Required:

According to the standards, what variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost?

Break down the difference computed in requirement 1 into a variable overhead rate variance and a variable overhead efficiency variance.

EXERCISE 11–8 Direct Materials and Direct Labor Variances [LO11–1, LO11–2]

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 6 microns per toy at $0.50 per micron

Direct labor: 1.3 hours per toy at $8 per hour

During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow:

Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.

Direct labor: 4,000 direct labor-hours were worked at a cost of $36,000.

Required:

1. Compute the following variances for July:

· a. The materials price and quantity variances.

· b. The labor rate and efficiency variances.

2. Prepare a brief explanation of the possible causes of each variance.