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Budgeting Problem - JRM

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Budgeting Problem - JRM

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Budgeting Problem - JRM

  1. 1. A B C 1 2 QUESTION II 3 4 Given, Constant Mix- 3 units of watch for every 1 unit of clock. 5 Watch Clock 6 Units 3 Units 1 Units 7 Selling Price $22.80 $38.80 8 Variable Cost $14.80 $26.80 9 Contribution Margin $8.00 $12.00 10 11 12 Current Mix 3 units + 1 unit = Composite unit 13 $8*3 + $12*1 = Composite unit 14 24 + 12 = 36 Composite unit 15 16 17 CALCULATION: 18 Given X is BEP unit for clock 19 3X is BEP For Watch 20 [($22.80*3X + $38.80*1X) - ($14.80*3X + $26.80*1X)] - $61200=0 21 [(68.40X + 38.8X) - (44.4X + 26.80X)] - $61200 = 0 22 [107.20X - 71.20X] - $61200 = 0 23 36X - $61200 = 0 24 X = $61200 / 36 units 25 X= 1700 units 26 Now X is BEP for Clock = 1700 units 27 3X is BEP for Watch = 3(1700)= 5100 units 28 29 ACTIVITY ANSWERS 30 Contribution Margin for Composite unit $36 31 BEP in Composite unit 1700 units 32 BEP for Clock 1700 units 33 BEP for Watch 5100 units
  2. 2. A B C D E F 1 2 QUESTION III 3 4 1 2 5 Actual Price Flexible Budget 6 Flexible Standard 7 8 (AQ * AP) AQ * SP (SQ * SP) 9 10 11 (8300 * 28) (8300 * 30) (2700 * 30 * 3) 12 13 14 $232,400 $249,000 $249,300 15 Price Variance Usage Variance 16 17 $2,49,000 * $2,32,400 $2,49,300 * $ 2,49,000 18 19 $16,600 $300 20 21 Favourable Favourable 22 23 24 25 (2) - (1) 26 27 $2,49,300 - $2,32,400 28 29 $16,900 30 31 Favourable 32 33 34 35 Given, ACTIVITY DIRECT MATERIAL 36 37 Standard price per unit of input $30 38 Actual price per unit of output $28 39 Standard inputs allowed per unit of output 3 pounds 40 Actual units of input 8300 pounds 41 Actual units of output 2770 units 42 43 44 45 REQUIREMENTS ANSWERS RESULT 46 1) The direct Material Price Variance $16,600 Favourable 47 2) The direct Material Usage Variance $300 Favourable 48 3) The direct Material Flxible Budget Variance $16,900 Favourable
  3. 3. QUESTION IV Drake Shipping Company Operating Performance Report Second Quarter, 20X1 Prepared by JAY MODI (1) (2) (3) (2)-(1) (2)-(3) (3)-(1) Variable unit value Actual results at used in Master Master actual sales activity Flexible Budget for actual Total Master Flexible Budget Sales Activity Budget Budget (volume) sales activity (volume) Budget Variance Variance Variance Units 800,000 760,000 760,000 (40,000) U 0 - (40,000) U Net Revenue 10.00 $8,000,000 $7,600,000 $7,600,000 (400,000) U 0 - (400,000) U Variable costs - Fuel Expense 0.20 $160,000 $157,000 $152,000 (3,000) F 5,000 U (8,000) F Repairs and maintenance 0.10 $80,000 $78,000 $76,000 (2,000) F 2,000 U (4,000) F Supplies and Miscelaneous 1.00 $800,000 $788,000 $760,000 (12,000) F 28,000 U (40,000) F Variable Payroll 6.70 $5,360,000 $5,200,000 $5,092,000 (160,000) F 108,000 U (268,000) F Total Variable Costs 8.00 $6,400,000 $6,223,000 $6,080,000 (177,000) F 143,000 U (320,000) F Contribution margin 2.00 $1,600,000 $1,377,000 $1,520,000 (223,000) U (143,000) U (80,000) U Fixed costs Supervision - $180,000 $183,000 $180,000 3,000 U 3,000 U - - Rent - $160,000 $160,000 $160,000 - - - - - - Depreciation - $480,000 $480,000 $480,000 - - - - - - Other Fixed Costs - $160,000 $158,000 $160,000 (2,000) F (2,000) F - - Total Fixed Costs - $980,000 $981,000 $980,000 1,000 U 1,000 U - - Operating income - $620,000 $396,000 $540,000 (224,000) U (144,000) U (80,000) U Decision Rule Revenue: Actual > Budget Actual < Budget Actual = Budget Expense Actual > Budget Actual < Budget Actual = Budget

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