Flexible budgets, variance analysis. You have been hired as a consultant by Mary Flanagan, the president of

Question:

Flexible budgets, variance analysis. You have been hired as a consultant by Mary Flanagan, the president of a small manufacturing company that makes automobile parts.

Flanagan is an excellent engineer, but she has been frustrated by working with inadequate cost data.

You helped install flexible budgeting and standard costs for Flanagan’s company. $he has now asked you to consider the following data for May and recommend how variances might be computed and presented in performance reports:

Static budget in output units 20,000 Actual output units produced and sold 23,000 Budgeted selling price per output unit $ 48 Budgeted variable costs per output unit $ 30 Budgeted total fixed costs per month $ 240,000 Actual revenue $1 ,048,800 Actual variable costs $ 756,000 Favourable variance in fixed costs $ 6,000 Flanagan is disappointed in the May data. Although output units sold exceeded expec¬

tations, operating income did not. Assume that there was no beginning or ending inventory.

272 CHAPTER 7 Required 1. You decide to present Flanagan with alternative ways to analyze variances so that she can decide what level of detail she prefers. The reporting system can then be designed accordingly.

Prepare an analysis similar to Levels 1 and 2 in Exhibit 7-5

(p. 257).

2. What are some likely causes for the variances you report in requirement 1?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 100% (QA)

Answered By

Asim farooq

I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening. My Expert Service Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities

4.40+ 65+ Reviews 86+ Question Solved

Related Book For book-img-for-question