Puget sound divers is a company that provides diving services

WEEK 4 TEXTBOOK PROBLEMS

 1.

value: 10.00 points

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)

250

   Revenue ($390.00q)

$

97,500

  Expenses:

       Wages and salaries ($11,900 + $122.00q)

42,400

       Supplies ($4.00q)

1,000

       Equipment rental ($2,300 + $23.00q)

8,050

        Insurance ($4,200)

4,200

       Miscellaneous ($520 + $1.46q)

885

  Total expense

56,535

  Net operating income

$

40,965

Required:

During May, the company’s activity was actually 240 diving-hours. Complete the following flexible budget for that level of activity.

2.

value: 10.00 points

Flight Café 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)

21,000

  Revenue ($3.80q)

$

79,800

  Expenses:

      Raw materials ($2.20q)

46,200

      Wages and salaries ($6,200 + $0.20q)

10,400

      Utilities ($1,900 + $0.05q)

2,950

      Facility rent ($3,100)

3,100

      Insurance ($2,700)

2,700

      Miscellaneous ($700 + $0.10q)

2,800

  Total expense

68,150

  Net operating income

$

11,650

In July, 22,000 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)

22,000

  Revenue ($3.80q)

$

83,600

  Expenses:

      Raw materials ($2.20q)

48,400

      Wages and salaries ($6,200 + $0.20q)

10,600

      Utilities ($1,900 + $0.05q)

3,000

      Facility rent ($3,100)

3,100

      Insurance ($2,700)

2,700

      Miscellaneous ($700 + $0.10q)

2,900

  Total expense

70,700

  Net operating income

$

12,900

Required:

1.

Compute the company’s activity variances for July. (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.)

 3.

value: 10.00 points

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,900 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)

7,900

  Revenue ($4.25q)

$

33,575

  Expenses:

      Packing supplies ($0.25q)

1,975

      Oyster bed maintenance ($3,200)

3,200

      Wages and salaries ($2,300 + $0.45q)

5,855

      Shipping ($0.55q)

4,345

      Utilities ($1,260)

1,260

      Other ($490 + $0.01q)

569

  Total expense

17,204

  Net operating income

$

16,371

The actual results for August appear below:

Quilcene Oysteria Income Statement For the Month Ended August 31

  Actual pounds

7,900

  Revenue

$

26,700

  Expenses:

      Packing supplies

2,145

      Oyster bed maintenance

3,060

      Wages and salaries

6,265

      Shipping

4,075

      Utilities

1,070

      Other

1,189

  Total expense

17,804

  Net operating income

$

8,896

Required:

Compute the company’s revenue and spending variances for August. (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.)

4.

value: 10.00 points

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below:

Division

Queensland

New South Wales

  Sales

$

1,080,000

$

2,385,000

  Average operating assets

$

600,000

$

530,000

  Net operating income

$

70,200

$

83,475

  Property, plant, and equipment (net)

$

241,000

$

191,000

Required:

1.

Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.)

2.

Which divisional manager seems to be doing the better job?

Queensland division

New South Wales division

5.

value: 10.00 points

A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be.

True

False

6.

value: 10.00 points

Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control.

True

False

7.

value: 10.00 points