Flexible BudgetMultiple-Choice: The University of Burns operates a motor pool with 20 vehicles. The motor pool furnishes gasoline, oil, and other supplies for the cars and hires one mechanic who does routine maintenance and minor repairs. Major repairs are done at a nearby commercial garage. A supervisor manages the operations. Each year, the supervisor prepares a master budget for the motor pool. Depreciation on the automobiles is recorded in the budget to determine the costs per mile. The schedule below presents the master budget for the year and for the month of March. The annual budget was based on the following assumptions:

The supervisor is unhappy with the monthly report. He claims it unfairly presents his performance for March. His previous employer used flexible budgeting to compare actual costs to budgeted amounts.

Required:

a. What is the gasoline monthly flexible budget and the resulting over or under budget? (Use miles as the activity base.)

b. What is the oil, minor repairs, parts, and supplies monthly flexible budget and over or under budget? (Use miles as the activity base.)

c. What is the salaries and benefits monthly flexible budget and the resulting over or under budget?

d. What is the major reason for the cost per mile to decrease from $0. 1 745 budgeted to $0.1518 actual?

(1) Decreased unit fixed costs. (2) Decreased unit variable costs. (3) Increased unit fixed cost and decreased unit variable cost. (4) Neither variable nor fixed unit costs decreased.

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1. 20 automobiles in the pool. 2. 30,000 miles per year per automobile. 3. 15 miles per gallon per automobile. 4. $0.90 per gallon of gas. 5. $0.006 per mile for oil, minor repairs, parts, and supplies. 6. $135 per automobile per year in outside repairs.