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Final Project Part I Budget Variance Report Submission
Joseph Aguirre
The assignment relates to the budget and variance analysis
of Peyton Approved. The excel Excel file provides for the
complete calculations and details of the budget. Then variance
analysis was done by comparing the actual results with (the)
budgeted (figures).
The results were as under follows:
Peyton Approved
Budget Variance Report
For the Year Ended …
Actual Results
Static Budget
Variance
Favorable/ Unfavorable
Direct materials variances
Cost/price variance
2,40,250
2,40,250
-
-
Efficiency variance
2,40,250
2,81,480
41,230
Favorable
Total direct materials variance
4,80,500
5,21,730
41,230
Favorable
Direct labor variances
Cost /price variance
4,95,000
5,28,000
33,000
Favorable
Efficiency variance
5,28,000
4,80,000
(48,000)
Unfavorable
Total direct labor variance
10,23,000
10,08,000
(15,000)
Unfavorable
[Please refer to my comments in your budget variance
worksheet to help you ensure that the figures in this table are
correct.]
The main reasons for the above variances are as under follows:
Material Variances:
· Cost/Price Variance: AThe variance is zero. This means there
has been no change in (the) per unit cost of material.
· Efficiency Variance: A favorable efficiency variance provides
for indicates better good management of the materials and usage
of high quality material (missing period)
Labor Variance:
· Cost/ Price Variance: The favorable variance was mainly
because of (a/the) fall in the labour rate.
· Efficiency Variance:Though Although the labor rate has
reduced was lower than what was budgeted, but the efficiency
of the labor is was reduced as (is) evident from (the)
unfavorable (efficiency) variance. One of the reason(s) for same
this could be poor training to of employees.
Changes Required:
On the basis of above (missing comma) the company should try
to improve the labor efficiency by providing them employees
with proper training. Also, the company should find suppliers of
raw materials providing that provide quality material(s) at (a)
lower price (missing comma) or (they should) try to purchase
(materials) in bulk so as to avail take adavantage of discounts.
Conclusion.
Actually, budget operation (construction?) and variance analysis
is are one some of the best accounting techniques in that enable
the business to analyse its pending [This word choice is a little
awkward and confusing.] resources and make changes where
applicable.Peyton Approved should (make) adjust(ments) on to
(its) labor (training?) and suppliers of raw materials so as it (the
company?) works effectively.
This is a good start. However, for this assignment, you need to
use your words (in sentence/paragraph format) to describe the
variances you found. You need to do this in order to
demonstrate to me your understanding of the course concepts.
Thus, you should describe how you calculated the variances and
what the variances tell you about the company’s operations.
You also need to provide more detail on the potential causes for
the variances you found and what should be investigated by the
company in order to determine the specific causes of the
variances (i.e., what parts of the company’s operations should
management examine).
You need to provide more detail on why the potential causes
you identified could be responsible for the variances you
observed (i.e., why do you think that training is the reason for
the labor inefficiencies you observed).
As a whole, this is a good start for this essay, but you need to
provide more detail in your explanations in order to
communicate to me your understanding of these budgets and
budget variances.
References
Nobles, T. L., Mattison, B. L., Matsumura, E. M. (2014).
Horngren’s financial and managerial accounting (4th ed.).
Upper Saddle River, NJ: Pearson Education, Inc.
Budget Variance ReportPeyton ApprovedBudget Variance
ReportFor the Year Ended …Actual ResultsStatic
BudgetVarianceFavorable/ UnfavorableDirect materials
variances Cost/price variance240,250240,250Missing Value
Monique Fournet: You should report your cost/price variance
[(AC x AQ) - (AQ x SC)] here. Missing Value
Monique Fournet: Here, you should indicate whether the
cost/price variance is favorable (0 and above) or unfavorable
(below 0).Incorrect Efficiency variance240,250281,480
Monique Fournet: These cells should be blank.41,230
Monique Fournet: Your efficiency variance [(AQ x SC) - (SC x
SQ)] belongs here.Favorable
Monique Fournet: Correcting your variances will help you
arrive at the correct answers here.Incorrect Total direct
materials variance480,500
Monique Fournet: This is where your 240,250 figure
belongs.521,730
Monique Fournet: Here is where you should report the total
direct materials variance for your static budget (SC x
SQ).41,230
Monique Fournet: Your total direct materials variance
(cost/price variance - efficiency variance) belongs
here.FavorableIncorrectDirect labor variances Cost /price
variance495,000528,00033,000FavorableIncorrect Efficiency
variance528,000480,000
Monique Fournet: These should be
blank.(48,000)UnfavorableIncorrect Total direct labor
variance1,023,000
Monique Fournet: You should report your 495,000 figure
here.1,008,000
Monique Fournet: This is where you should report your static
budget direct labor variance (SC x SQ).
Monique Fournet: You should report your cost/price variance
[(AC x AQ) - (AQ x SC)] here.
Monique Fournet: These cells should be blank.
Monique Fournet: This is where your 240,250 figure belongs.
Monique Fournet: Here, you should indicate whether the
cost/price variance is favorable (0 and above) or unfavorable
(below 0).
Monique Fournet: Your efficiency variance [(AQ x SC) - (SC x
SQ)] belongs here.
Monique Fournet: Here is where you should report the total
direct materials variance for your static budget (SC x SQ).
Monique Fournet: Correcting your variances will help you
arrive at the correct answers here.
Monique Fournet: Your total direct materials variance
(cost/price variance - efficiency variance) belongs
here.(15,000)UnfavorableIncorrectMaterial Price Variance
=Actual Quantity x (Standard Price - Actual Price)Material
Efficiency Variance =Standard Price x (Standard Quantity for
actual production - Actual Quantity)Total Direct Material
Variance =(Standard Price x Standard Quantity) - (Actual
Quantity x Actual price)=41230FavorableLabor Price Variance
=Actual Hours (Standard Rate - Actual Rate)Labor Efficiency
Variance =Standard Rate x (Standard hours for actual
production - Actual Quantity)Total Direct Labor Variance
=(Standard Rate x Standard Hours) - (Actual Hours x Actual
Rate)=-15000Unfavorable
Labor and Materials VarianceLabor varianceactual costactual
quantitystandard coststandard quantityMISSING VALUE
Monique Fournet: This is where you should report the actual
cost of your labor, $15.00.MISSING VALUE
Monique Fournet: This is where you should report the actual
quantity of labor hours used (33,000).MISSING VALUE
Monique Fournet: This is where you should report your standard
cost of labor, $16.00.MISSING VALUE
Monique Fournet: This is where you should report your standard
quantity of labor used, 30,000 hours.MISSING VALUE
Monique Fournet: This is where you should report your actual
labor results (your Actual Cost x your Actual Quantity of
labor).MISSING VALUE
Monique Fournet: This is where you should report your Actual
Quantity of labor used x your Standard Cost of labor.MISSING
VALUE
Monique Fournet: This is where you should report your
budgeted (standard) labor cost x your budgeted (standard) labor
quantity.15
Monique Fournet: This belongs under "actual cost."
Monique Fournet: This is where you should report your standard
cost of labor, $16.00.
Monique Fournet: This is where you should report your Actual
Quantity of labor used x your Standard Cost of labor.33,00016
Monique Fournet: Here, you need to report the efficiency
variance for your direct labor. You calculate this by:
[(Standard Cost x Standard Quantity) - (Actual Quantity x
Standard Cost)]30,000
Monique Fournet: This figure belongs under "standard
quantity."MISSING VALUE
Monique Fournet: You need to indicate whether the variance
you found was favorable (0 and above) or unfavorable.
Monique Fournet: This is where you should report your standard
quantity of labor used, 30,000 hours.
Monique Fournet: This is where you should report your
budgeted (standard) labor cost x your budgeted (standard) labor
quantity.
Monique Fournet: Here, you need to report the efficiency
variance for your direct labor. You calculate this by:
[(Standard Cost x Standard Quantity) - (Actual Quantity x
Standard Cost)]MISSING VALUE
Monique Fournet: Again, you need to indicate whether the
variance you found is favorable or unfavorable.
Monique Fournet: This figure belongs under "standard
quantity."MISSING VALUE
Monique Fournet: You need to report your total direct labor
variance here. Materials varianceactual costactual
quantitystandard coststandard quantityMISSING VALUE
Monique Fournet: You should report your actual cost for your
direct materials, $7.75, here. MISSING VALUE
Monique Fournet: Here, you should report your actual quantity
of materials used, 31,000. MISSING VALUE
Monique Fournet: You need to report the standard (budgeted)
cost of the direct materials, $7.75, here.7.75
Monique Fournet: This belongs under "actual cost."
Monique Fournet: Here, you should report your actual quantity
of materials used, 31,000. MISSING VALUE
Monique Fournet: Here, you should report your Actual Cost of
your materials x your Actual Quantity of materials used.31,000
Monique Fournet: This belongs under "actual quantity."
Monique Fournet: You need to report the standard (budgeted)
cost of the direct materials, $7.75, here. MISSING VALUE
Monique Fournet: Here, you need to report the Actual Quantity
of materials used x the Standard Cost of the materials.7.75
Monique Fournet: This belongs under "standard cost."
MISSING VALUE
Monique Fournet: Here, you need to report the (Standard Cost x
Standard Quantity) figure.36,320
Monique Fournet: This should be under "standard quantity."
MISSING VALUE
Monique Fournet: Here, you should report your cost/price
variance, which is calculated by:
[(Actual Cost x Actual Quantity) - (Actual Quantity x Standard
Cost)]
Monique Fournet: This belongs under "standard cost."
MISSING VALUE
Monique Fournet: You should report your direct materials
efficiency variance here. This is calculated by:
[(Standard Cost x Standard Quantity) - [Actual Quantity x
Standard Cost] MISSING VALUE
Monique Fournet: You need to indicate whether the variance
you found is favorable (0 and above) or unfavorable.
Monique Fournet: Here is where you should report your
Standard Quantity for direct materials, 36,320.
Monique Fournet: Here, you need to report the (Standard Cost x
Standard Quantity) figure.
Monique Fournet: You should report your direct materials
efficiency variance here. This is calculated by:
[(Standard Cost x Standard Quantity) - [Actual Quantity x
Standard Cost]
Monique Fournet: This should be under "standard quantity."
MISSING VALUE
Monique Fournet: You need to indicate whether the variance
you found is favorable or unfavorable. MISSING VALUE
Monique Fournet: You should report your total direct materials
variance here. This is calculated by:
[(Actual Cost x Actual Quantity) - (Standard Cost x Standard
Quantity)]
Sheet3
InstructionsYou are a manager for Peyton Approved, a pet
supplies manufacturer. This responsibility requires you to create
budgets, make pricing decisions, and analyze the results of
operations to determine if changes need to be made to make the
company more efficient.
You will be preparing a budget for the quarter July through
September 2015. You are provided the following information.
The budgeted balance sheet on June 30, 2015, is:Peyton
ApprovedBudgeted Balance Sheet30-Jun-15ASSETSCash
$42,000Accounts receivable259,900Raw materials
inventory35,650Finished goods inventory 241,080Total current
assets 578,630Equipment $720,000Less accumulated
depreciation 240,000480,000Total assets
$1,058,630LIABILITIES AND EQUITYAccounts
payable$63,400Short-term notes payable24,000Taxes payable
10,000Total current liabilities 97,400Long-term note payable
300,000 Total liabilities397,400Common stock
$600,000Retained earnings 61,230Total stockholders’
equity661,230Total liabilities and equity$1,058,630All
assumptions are new and apply to the July through September
budget period.1. Sales were 20,000 units in June 2015.
Forecasted sales in units are as follows: July, 18,000; August,
22,000; September, 20,000; October, 24,000. The product’s
selling price is $18.00 per unit and its total product cost is
$14.35 per unit.2. The June 30 finished goods inventory is
16,800 units.3. Going forward, company policy calls for a given
month’s ending finished goods inventory to equal 70% of the
next month’s expected unit sales.4. The June 30 raw materials
inventory is 4,600 units. The budgeted September 30 raw
materials inventory is 1,980 units. Raw materials cost $7.75 per
unit. Each finished unit requires 0.50 units of raw materials.
Company policy calls for a given month’s ending raw materials
inventory to equal 20% of the next month’s materials
requirements. 5. Each finished unit requires 0.50 hours of direct
labor at a rate of $16 per hour.6. Overhead is allocated based on
direct labor hours. The predetermined variable overhead rate is
$1.35 per unit produced. Depreciation of $20,000 per month is
treated as fixed factory overhead.7. Monthly general and
administrative expenses include $12,000 administrative salaries
and 0.9% monthly interest on the long-term note payable.8.
Sales representatives’ commissions are 12% of sales and are
paid in the month of the sales. The sales manager’s monthly
salary is $3,750 per month.Specifically, the following critical
elements must be addressed when creating an Operating Budget
by completing the budget templates found on the "Budgets" tab
below.Step 1: Prepare a Sales BudgetComplete the Sales Budget
on the Budgets tab below by using the information found in the
budgeted balance sheet above. Consider assumption 1 when
completing this critical element: Sales were 20,000 units in
June 2015. Forecasted sales in units are as follows: July,
18,000; August, 22,000; September, 20,000; October, 24,000.
The product’s selling price is $18.00 per unit and its total
product cost is $14.35 per unit.You can find an example of a
sales budget in Exhibit 22-5 on page 1324 of the textbook.Step
2: Prepare a Production BudgetComplete the Production Budget
on the Budgets tab below by using the information found in the
budgeted balance sheet above. Consider assumption 1 while
completing this critical element: Sales were 20,000 units in
June 2015. Forecasted sales in units are as follows: July,
18,000; August, 22,000; September, 20,000; October, 24,000.
The product’s selling price is $18.00 per unit and its total
product cost is $14.35 per unit.Consider assumption 2 while
completing this critical element: The June 30 finished goods
inventory is 16,800 units.Consider assumption 3 while
completing this critical element: Going forward, company
policy calls for a given month’s ending finished goods
inventory to equal 70% of the next month’s expected unit
sales.You can find an example of a production budget in Exhibit
22-6 on page 1325 of the textbook.Step 3: Prepare a
Manufacturing BudgetComplete the Manufacturing Budget on
the Budgets tab below by using the information found in the
budgeted balance sheet above. The manufacturing budget
consists of three parts: the Raw Materials Budget, the Direct
Labor Budget, and the Factory Overhead Budget.Raw Material
BudgetConsider assumption 4 while completing this critical
element: The June 30 raw materials inventory is 4,600 units.
The budgeted September 30 raw materials inventory is 1,980
units. Raw materials cost $7.75 per unit. Each finished unit
requires 0.50 units of raw materials. Company policy calls for a
given month’s ending raw materials inventory to equal 20% of
the next month’s materials requirements.Consider units to be
produced found in the production budget while completing this
critical element.Direct Labor BudgetConsider assumption 5
while completing this critical element: Each finished unit
requires 0.50 hours of direct labor at a rate of $16 per
hour.Consider units to be produced found in the production
budget while completing this critical element.Factory Overhead
BudgetConsider assumption 6 while completing this critical
element: Overhead is allocated based on direct labor hours. The
predetermined variable overhead rate is $1.35 per unit
produced. Depreciation of $20,000 per month is treated as fixed
factory overhead.Consider units to be produced found in the
production budget while completing this critical element.Step 4:
Prepare a Selling BudgetComplete the Selling Expense
Budget.Consider assumption 8 while completing this critical
element: 8. Sales representatives’ commissions are 12% of sales
and are paid in the month of the sales. The sales manager’s
monthly salary is $3,750 per month.Step 5: General and
Administrative Expense BudgetComplete the General and
Administrative Expense Budget.Consider assumption 7 while
completing this critical element: 7. Monthly general and
administrative expenses include $12,000 administrative salaries
and 0.9% monthly interest on the long-term note payable.The
following critical elements must be addressed when performing
the Budget Variance Analysis using the Budget Variance
Worksheet. The Budget Variance Worksheet can be found in the
Assignment Guidelines and Rubrics folder.The actual quantity
of material used was 31,000 with an actual cost of $7.75 per
unit. The actual labor hours were 33,000 with an actual rate per
hour of $15.Step 1: Complete A. Develop a variance analysis
including a budget variance performance report and appropriate
variances for materials, labor, and overhead.Start with the
Labor and Materials Variance tab.Standard costs/quantities
come from the raw materials budget and the labor budget.Use
Exhibits 23-11 on page 1416 and 23-12 on page 1419 in the
textbook as guides.After completing the Labor and Materials
Variance tab, transfer variances to the Budget Variance Report
tab.Congratulations! You have completed the workbook portion
of Final Project Part I. To complete the remainder of the Budget
Variance Analysis portion of Final Project Part I, use the Final
Project Part I Budget Variance Report Template. The Budget
Variance Report Template can be found in the Assignment
Guidelines and Rubrics folder.
BudgetsSales BudgetPeyton ApprovedSales BudgetsJuly,
August, and September 2015Budgeted UnitsBudgeted Unit
PriceBudgeted Total DollarsJul-1518,000$ 18.00$324,000Aug-
1522,000$ 18.00$396,000Sep-1520,000$ 18.00$360,000Total
for the first quarter 60,000$1,080,000CorrectProduction
BudgetPeyton ApprovedProduction BudgetJuly, August, and
September 2015JulyAugust Sept. TotalNext month’s
budgeted sales 22,00020,00024,000Percentage of inventory to
future sales 70%70%70%Budgeted ending inventory
15,40014,00016,80046,200Add budgeted sales
18,00022,00020,00060,000Required units to be produced
33,40036,00036,800106,200Deduct beginning inventory
(Previous month ending
inventory)16,80015,40014,00046,200Units to be produced
16,60020,60022,80060,000CorrectManufacturing Budget -
contains raw materials budget, direct labor budget, and factory
overhead budgetPeyton ApprovedRaw Materials BudgetJuly,
August, and September 2015JulyAugust Sept.
TotalProduction budget (units) 16,60020,60022,800Materials
requirement per unit 0.50.50.5Materials needed for production
8,30010,30011,40030,000Add budgeted ending inventory
2,0602,2801,9806,320Total materials requirements (units)
10,36012,58013,38036,320Deduct beginning inventory
(previous month ending
inventory)4,6002,0602,2808,940Materials to be purchased
5,76010,52011,10027,380Material price per unit $ 7.75$
7.75$ 7.75$ 7.75Total cost of direct material purchases
$44,640.00$81,530.00$86,025.00$212,195.00CorrectPeyton
ApprovedDirect Labor BudgetJuly, August, and September 2015
JulyAugust Sept. TotalBudgeted production (units)
16,60020,60022,800Labor requirements per unit (hours)
0.50.50.5Total labor hours needed
8,30010,30011,40030,000Labor rate (per hour) $ 16.00$
16.00$ 16.00Labor dollars $132,800$164,800$182,400$
480,000.00CorrectPeyton ApprovedFactory Overhead
BudgetJuly, August, and September 2015JulyAugust Sept.
TotalBudgeted production (units) 16,60020,60022800Variable
factory overhead rate0.675
Monique Fournet: According to the assignment instructions, the
predetermined variable overhead rate is $1.35 per unit
produced.0.6750.675INCORRECTBudgeted variable overhead $
11,205.00
Monique Fournet: Using the correct variable factory overhead
rate will help you arrive at the correct answers here.
The September budgeted variable overhead rate should be
30,780.$ 13,905.00$ 15,390.00$
40,500.00INCORRECTFixed overhead 20,00020,00020,000$
60,000.00Budgeted total overhead $ 31,205.00
Monique Fournet: Correcting your earlier mistakes will help
you arrive at the correct answers here.
To further help you, the August budgeted total overhead should
be $47,810.$ 33,905.00$ 35,390.00$
100,500.00INCORRECT.Selling Expense BudgetPeyton
ApprovedSelling Expense BudgetJuly, August, and September
2015 JulyAugust Sept. TotalBudgeted sales
$324,000$396,000$360,000MISSING VALUE
Monique Fournet: You needed to total the budgeted sales
amounts for all three months for this part of the budget.
Monique Fournet: According to the assignment instructions, the
predetermined variable overhead rate is $1.35 per unit
produced.
Monique Fournet: Using the correct variable factory overhead
rate will help you arrive at the correct answers here.
The September budgeted variable overhead rate should be
30,780.
Monique Fournet: Correcting your earlier mistakes will help
you arrive at the correct answers here.
To further help you, the August budgeted total overhead should
be $47,810.Sales commission percent 12%12%12%Sales
commissions expense $ 38,880.00$ 47,520.00$ 43,200.00$
129,600.00Sales salaries $ 3,750.00$ 3,750.00$ 3,750.00$
11,250.00Total selling expenses $ 42,630.00$ 51,270.00$
46,950.00$ 140,850.00CORRECTGeneral and Administrative
Expense BudgetPeyton ApprovedGeneral and Administrative
Expense BudgetJuly, August, and September 2015JulyAugust
Sept. TotalSalaries $12,000$12,000$12,000$36,000Interest on
long-term note 2,7002,7002,700$8,100Total expenses
$14,700$14,700$14,700$44,100CORRECT

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  • 1. Final Project Part I Budget Variance Report Submission Joseph Aguirre The assignment relates to the budget and variance analysis of Peyton Approved. The excel Excel file provides for the complete calculations and details of the budget. Then variance analysis was done by comparing the actual results with (the) budgeted (figures). The results were as under follows: Peyton Approved Budget Variance Report For the Year Ended … Actual Results Static Budget Variance
  • 2. Favorable/ Unfavorable Direct materials variances Cost/price variance 2,40,250 2,40,250 - - Efficiency variance 2,40,250 2,81,480 41,230 Favorable Total direct materials variance 4,80,500 5,21,730 41,230 Favorable Direct labor variances
  • 3. Cost /price variance 4,95,000 5,28,000 33,000 Favorable Efficiency variance 5,28,000 4,80,000 (48,000) Unfavorable Total direct labor variance 10,23,000 10,08,000 (15,000) Unfavorable [Please refer to my comments in your budget variance worksheet to help you ensure that the figures in this table are correct.] The main reasons for the above variances are as under follows: Material Variances: · Cost/Price Variance: AThe variance is zero. This means there has been no change in (the) per unit cost of material. · Efficiency Variance: A favorable efficiency variance provides for indicates better good management of the materials and usage of high quality material (missing period) Labor Variance: · Cost/ Price Variance: The favorable variance was mainly because of (a/the) fall in the labour rate. · Efficiency Variance:Though Although the labor rate has reduced was lower than what was budgeted, but the efficiency of the labor is was reduced as (is) evident from (the) unfavorable (efficiency) variance. One of the reason(s) for same
  • 4. this could be poor training to of employees. Changes Required: On the basis of above (missing comma) the company should try to improve the labor efficiency by providing them employees with proper training. Also, the company should find suppliers of raw materials providing that provide quality material(s) at (a) lower price (missing comma) or (they should) try to purchase (materials) in bulk so as to avail take adavantage of discounts. Conclusion. Actually, budget operation (construction?) and variance analysis is are one some of the best accounting techniques in that enable the business to analyse its pending [This word choice is a little awkward and confusing.] resources and make changes where applicable.Peyton Approved should (make) adjust(ments) on to (its) labor (training?) and suppliers of raw materials so as it (the company?) works effectively. This is a good start. However, for this assignment, you need to use your words (in sentence/paragraph format) to describe the variances you found. You need to do this in order to demonstrate to me your understanding of the course concepts. Thus, you should describe how you calculated the variances and what the variances tell you about the company’s operations. You also need to provide more detail on the potential causes for the variances you found and what should be investigated by the company in order to determine the specific causes of the variances (i.e., what parts of the company’s operations should management examine). You need to provide more detail on why the potential causes you identified could be responsible for the variances you observed (i.e., why do you think that training is the reason for
  • 5. the labor inefficiencies you observed). As a whole, this is a good start for this essay, but you need to provide more detail in your explanations in order to communicate to me your understanding of these budgets and budget variances. References Nobles, T. L., Mattison, B. L., Matsumura, E. M. (2014). Horngren’s financial and managerial accounting (4th ed.). Upper Saddle River, NJ: Pearson Education, Inc.
  • 6. Budget Variance ReportPeyton ApprovedBudget Variance ReportFor the Year Ended …Actual ResultsStatic BudgetVarianceFavorable/ UnfavorableDirect materials variances Cost/price variance240,250240,250Missing Value Monique Fournet: You should report your cost/price variance [(AC x AQ) - (AQ x SC)] here. Missing Value Monique Fournet: Here, you should indicate whether the cost/price variance is favorable (0 and above) or unfavorable (below 0).Incorrect Efficiency variance240,250281,480 Monique Fournet: These cells should be blank.41,230 Monique Fournet: Your efficiency variance [(AQ x SC) - (SC x SQ)] belongs here.Favorable Monique Fournet: Correcting your variances will help you arrive at the correct answers here.Incorrect Total direct materials variance480,500 Monique Fournet: This is where your 240,250 figure belongs.521,730 Monique Fournet: Here is where you should report the total direct materials variance for your static budget (SC x SQ).41,230
  • 7. Monique Fournet: Your total direct materials variance (cost/price variance - efficiency variance) belongs here.FavorableIncorrectDirect labor variances Cost /price variance495,000528,00033,000FavorableIncorrect Efficiency variance528,000480,000 Monique Fournet: These should be blank.(48,000)UnfavorableIncorrect Total direct labor variance1,023,000 Monique Fournet: You should report your 495,000 figure here.1,008,000 Monique Fournet: This is where you should report your static budget direct labor variance (SC x SQ). Monique Fournet: You should report your cost/price variance [(AC x AQ) - (AQ x SC)] here. Monique Fournet: These cells should be blank. Monique Fournet: This is where your 240,250 figure belongs. Monique Fournet: Here, you should indicate whether the cost/price variance is favorable (0 and above) or unfavorable (below 0). Monique Fournet: Your efficiency variance [(AQ x SC) - (SC x SQ)] belongs here. Monique Fournet: Here is where you should report the total direct materials variance for your static budget (SC x SQ). Monique Fournet: Correcting your variances will help you arrive at the correct answers here.
  • 8. Monique Fournet: Your total direct materials variance (cost/price variance - efficiency variance) belongs here.(15,000)UnfavorableIncorrectMaterial Price Variance =Actual Quantity x (Standard Price - Actual Price)Material Efficiency Variance =Standard Price x (Standard Quantity for actual production - Actual Quantity)Total Direct Material Variance =(Standard Price x Standard Quantity) - (Actual Quantity x Actual price)=41230FavorableLabor Price Variance =Actual Hours (Standard Rate - Actual Rate)Labor Efficiency Variance =Standard Rate x (Standard hours for actual production - Actual Quantity)Total Direct Labor Variance =(Standard Rate x Standard Hours) - (Actual Hours x Actual Rate)=-15000Unfavorable Labor and Materials VarianceLabor varianceactual costactual quantitystandard coststandard quantityMISSING VALUE Monique Fournet: This is where you should report the actual cost of your labor, $15.00.MISSING VALUE Monique Fournet: This is where you should report the actual quantity of labor hours used (33,000).MISSING VALUE Monique Fournet: This is where you should report your standard cost of labor, $16.00.MISSING VALUE Monique Fournet: This is where you should report your standard quantity of labor used, 30,000 hours.MISSING VALUE Monique Fournet: This is where you should report your actual labor results (your Actual Cost x your Actual Quantity of labor).MISSING VALUE Monique Fournet: This is where you should report your Actual Quantity of labor used x your Standard Cost of labor.MISSING VALUE
  • 9. Monique Fournet: This is where you should report your budgeted (standard) labor cost x your budgeted (standard) labor quantity.15 Monique Fournet: This belongs under "actual cost." Monique Fournet: This is where you should report your standard cost of labor, $16.00. Monique Fournet: This is where you should report your Actual Quantity of labor used x your Standard Cost of labor.33,00016 Monique Fournet: Here, you need to report the efficiency variance for your direct labor. You calculate this by: [(Standard Cost x Standard Quantity) - (Actual Quantity x Standard Cost)]30,000 Monique Fournet: This figure belongs under "standard quantity."MISSING VALUE Monique Fournet: You need to indicate whether the variance you found was favorable (0 and above) or unfavorable. Monique Fournet: This is where you should report your standard quantity of labor used, 30,000 hours. Monique Fournet: This is where you should report your budgeted (standard) labor cost x your budgeted (standard) labor quantity. Monique Fournet: Here, you need to report the efficiency variance for your direct labor. You calculate this by: [(Standard Cost x Standard Quantity) - (Actual Quantity x
  • 10. Standard Cost)]MISSING VALUE Monique Fournet: Again, you need to indicate whether the variance you found is favorable or unfavorable. Monique Fournet: This figure belongs under "standard quantity."MISSING VALUE Monique Fournet: You need to report your total direct labor variance here. Materials varianceactual costactual quantitystandard coststandard quantityMISSING VALUE Monique Fournet: You should report your actual cost for your direct materials, $7.75, here. MISSING VALUE Monique Fournet: Here, you should report your actual quantity of materials used, 31,000. MISSING VALUE Monique Fournet: You need to report the standard (budgeted) cost of the direct materials, $7.75, here.7.75 Monique Fournet: This belongs under "actual cost." Monique Fournet: Here, you should report your actual quantity of materials used, 31,000. MISSING VALUE Monique Fournet: Here, you should report your Actual Cost of your materials x your Actual Quantity of materials used.31,000 Monique Fournet: This belongs under "actual quantity." Monique Fournet: You need to report the standard (budgeted) cost of the direct materials, $7.75, here. MISSING VALUE Monique Fournet: Here, you need to report the Actual Quantity of materials used x the Standard Cost of the materials.7.75
  • 11. Monique Fournet: This belongs under "standard cost." MISSING VALUE Monique Fournet: Here, you need to report the (Standard Cost x Standard Quantity) figure.36,320 Monique Fournet: This should be under "standard quantity." MISSING VALUE Monique Fournet: Here, you should report your cost/price variance, which is calculated by: [(Actual Cost x Actual Quantity) - (Actual Quantity x Standard Cost)] Monique Fournet: This belongs under "standard cost." MISSING VALUE Monique Fournet: You should report your direct materials efficiency variance here. This is calculated by: [(Standard Cost x Standard Quantity) - [Actual Quantity x Standard Cost] MISSING VALUE Monique Fournet: You need to indicate whether the variance you found is favorable (0 and above) or unfavorable. Monique Fournet: Here is where you should report your Standard Quantity for direct materials, 36,320. Monique Fournet: Here, you need to report the (Standard Cost x Standard Quantity) figure. Monique Fournet: You should report your direct materials efficiency variance here. This is calculated by:
  • 12. [(Standard Cost x Standard Quantity) - [Actual Quantity x Standard Cost] Monique Fournet: This should be under "standard quantity." MISSING VALUE Monique Fournet: You need to indicate whether the variance you found is favorable or unfavorable. MISSING VALUE Monique Fournet: You should report your total direct materials variance here. This is calculated by: [(Actual Cost x Actual Quantity) - (Standard Cost x Standard Quantity)] Sheet3 InstructionsYou are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient. You will be preparing a budget for the quarter July through September 2015. You are provided the following information. The budgeted balance sheet on June 30, 2015, is:Peyton ApprovedBudgeted Balance Sheet30-Jun-15ASSETSCash $42,000Accounts receivable259,900Raw materials inventory35,650Finished goods inventory 241,080Total current assets 578,630Equipment $720,000Less accumulated depreciation 240,000480,000Total assets $1,058,630LIABILITIES AND EQUITYAccounts payable$63,400Short-term notes payable24,000Taxes payable 10,000Total current liabilities 97,400Long-term note payable 300,000 Total liabilities397,400Common stock $600,000Retained earnings 61,230Total stockholders’ equity661,230Total liabilities and equity$1,058,630All
  • 13. assumptions are new and apply to the July through September budget period.1. Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product’s selling price is $18.00 per unit and its total product cost is $14.35 per unit.2. The June 30 finished goods inventory is 16,800 units.3. Going forward, company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales.4. The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month’s ending raw materials inventory to equal 20% of the next month’s materials requirements. 5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed factory overhead.7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.8. Sales representatives’ commissions are 12% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,750 per month.Specifically, the following critical elements must be addressed when creating an Operating Budget by completing the budget templates found on the "Budgets" tab below.Step 1: Prepare a Sales BudgetComplete the Sales Budget on the Budgets tab below by using the information found in the budgeted balance sheet above. Consider assumption 1 when completing this critical element: Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product’s selling price is $18.00 per unit and its total product cost is $14.35 per unit.You can find an example of a sales budget in Exhibit 22-5 on page 1324 of the textbook.Step 2: Prepare a Production BudgetComplete the Production Budget
  • 14. on the Budgets tab below by using the information found in the budgeted balance sheet above. Consider assumption 1 while completing this critical element: Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product’s selling price is $18.00 per unit and its total product cost is $14.35 per unit.Consider assumption 2 while completing this critical element: The June 30 finished goods inventory is 16,800 units.Consider assumption 3 while completing this critical element: Going forward, company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales.You can find an example of a production budget in Exhibit 22-6 on page 1325 of the textbook.Step 3: Prepare a Manufacturing BudgetComplete the Manufacturing Budget on the Budgets tab below by using the information found in the budgeted balance sheet above. The manufacturing budget consists of three parts: the Raw Materials Budget, the Direct Labor Budget, and the Factory Overhead Budget.Raw Material BudgetConsider assumption 4 while completing this critical element: The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month’s ending raw materials inventory to equal 20% of the next month’s materials requirements.Consider units to be produced found in the production budget while completing this critical element.Direct Labor BudgetConsider assumption 5 while completing this critical element: Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.Consider units to be produced found in the production budget while completing this critical element.Factory Overhead BudgetConsider assumption 6 while completing this critical element: Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed
  • 15. factory overhead.Consider units to be produced found in the production budget while completing this critical element.Step 4: Prepare a Selling BudgetComplete the Selling Expense Budget.Consider assumption 8 while completing this critical element: 8. Sales representatives’ commissions are 12% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,750 per month.Step 5: General and Administrative Expense BudgetComplete the General and Administrative Expense Budget.Consider assumption 7 while completing this critical element: 7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.The following critical elements must be addressed when performing the Budget Variance Analysis using the Budget Variance Worksheet. The Budget Variance Worksheet can be found in the Assignment Guidelines and Rubrics folder.The actual quantity of material used was 31,000 with an actual cost of $7.75 per unit. The actual labor hours were 33,000 with an actual rate per hour of $15.Step 1: Complete A. Develop a variance analysis including a budget variance performance report and appropriate variances for materials, labor, and overhead.Start with the Labor and Materials Variance tab.Standard costs/quantities come from the raw materials budget and the labor budget.Use Exhibits 23-11 on page 1416 and 23-12 on page 1419 in the textbook as guides.After completing the Labor and Materials Variance tab, transfer variances to the Budget Variance Report tab.Congratulations! You have completed the workbook portion of Final Project Part I. To complete the remainder of the Budget Variance Analysis portion of Final Project Part I, use the Final Project Part I Budget Variance Report Template. The Budget Variance Report Template can be found in the Assignment Guidelines and Rubrics folder. BudgetsSales BudgetPeyton ApprovedSales BudgetsJuly, August, and September 2015Budgeted UnitsBudgeted Unit PriceBudgeted Total DollarsJul-1518,000$ 18.00$324,000Aug- 1522,000$ 18.00$396,000Sep-1520,000$ 18.00$360,000Total
  • 16. for the first quarter 60,000$1,080,000CorrectProduction BudgetPeyton ApprovedProduction BudgetJuly, August, and September 2015JulyAugust Sept. TotalNext month’s budgeted sales 22,00020,00024,000Percentage of inventory to future sales 70%70%70%Budgeted ending inventory 15,40014,00016,80046,200Add budgeted sales 18,00022,00020,00060,000Required units to be produced 33,40036,00036,800106,200Deduct beginning inventory (Previous month ending inventory)16,80015,40014,00046,200Units to be produced 16,60020,60022,80060,000CorrectManufacturing Budget - contains raw materials budget, direct labor budget, and factory overhead budgetPeyton ApprovedRaw Materials BudgetJuly, August, and September 2015JulyAugust Sept. TotalProduction budget (units) 16,60020,60022,800Materials requirement per unit 0.50.50.5Materials needed for production 8,30010,30011,40030,000Add budgeted ending inventory 2,0602,2801,9806,320Total materials requirements (units) 10,36012,58013,38036,320Deduct beginning inventory (previous month ending inventory)4,6002,0602,2808,940Materials to be purchased 5,76010,52011,10027,380Material price per unit $ 7.75$ 7.75$ 7.75$ 7.75Total cost of direct material purchases $44,640.00$81,530.00$86,025.00$212,195.00CorrectPeyton ApprovedDirect Labor BudgetJuly, August, and September 2015 JulyAugust Sept. TotalBudgeted production (units) 16,60020,60022,800Labor requirements per unit (hours) 0.50.50.5Total labor hours needed 8,30010,30011,40030,000Labor rate (per hour) $ 16.00$ 16.00$ 16.00Labor dollars $132,800$164,800$182,400$ 480,000.00CorrectPeyton ApprovedFactory Overhead BudgetJuly, August, and September 2015JulyAugust Sept. TotalBudgeted production (units) 16,60020,60022800Variable factory overhead rate0.675 Monique Fournet: According to the assignment instructions, the
  • 17. predetermined variable overhead rate is $1.35 per unit produced.0.6750.675INCORRECTBudgeted variable overhead $ 11,205.00 Monique Fournet: Using the correct variable factory overhead rate will help you arrive at the correct answers here. The September budgeted variable overhead rate should be 30,780.$ 13,905.00$ 15,390.00$ 40,500.00INCORRECTFixed overhead 20,00020,00020,000$ 60,000.00Budgeted total overhead $ 31,205.00 Monique Fournet: Correcting your earlier mistakes will help you arrive at the correct answers here. To further help you, the August budgeted total overhead should be $47,810.$ 33,905.00$ 35,390.00$ 100,500.00INCORRECT.Selling Expense BudgetPeyton ApprovedSelling Expense BudgetJuly, August, and September 2015 JulyAugust Sept. TotalBudgeted sales $324,000$396,000$360,000MISSING VALUE Monique Fournet: You needed to total the budgeted sales amounts for all three months for this part of the budget. Monique Fournet: According to the assignment instructions, the predetermined variable overhead rate is $1.35 per unit produced. Monique Fournet: Using the correct variable factory overhead rate will help you arrive at the correct answers here. The September budgeted variable overhead rate should be 30,780.
  • 18. Monique Fournet: Correcting your earlier mistakes will help you arrive at the correct answers here. To further help you, the August budgeted total overhead should be $47,810.Sales commission percent 12%12%12%Sales commissions expense $ 38,880.00$ 47,520.00$ 43,200.00$ 129,600.00Sales salaries $ 3,750.00$ 3,750.00$ 3,750.00$ 11,250.00Total selling expenses $ 42,630.00$ 51,270.00$ 46,950.00$ 140,850.00CORRECTGeneral and Administrative Expense BudgetPeyton ApprovedGeneral and Administrative Expense BudgetJuly, August, and September 2015JulyAugust Sept. TotalSalaries $12,000$12,000$12,000$36,000Interest on long-term note 2,7002,7002,700$8,100Total expenses $14,700$14,700$14,700$44,100CORRECT