100% a $ fx BUSAD 202 F G E D B BUSAD 202 Flexible Budgeting and Standard Cost Project Group 7 8 9 10 12 13 15 17 18 - Vaughan Company had a dismal 3rd Quarter! Management had wanted to wait until quarter end to do a post mortem of the annual results and do some investigations if necessary. Here is what actually happened: Total sales were $2,340,000 for 30,000 units. Management failed to be able to buy enough direct materials to produce the required units for ending inventory nor to keep the required direct materials on hand for ending inventory requirements due to a shortage of WHAM during the quarter. Total Production for 3rd quarter was 30,000 units. Vaughan uses LIFO inventory method. Regarding WHAM, Vaughan purchased and used 18,100 pounds at a total cost of $239,010. Vaughan used 60,500 DLH (direct labor hours) to make the 30,000 units at a total labor cost of $895,400. Actual Variable FOH was $121,000 and actual Fixed FOH was $21,000. Even though Production ended up being 30,000 units, the cash borrowings indicated by the static budget dictated that Vaughan borrow money ($174,000) on the last day of August and they did so. They also paid it back at the end of the September as budgeted. Selling and Administrative expenses totaled $303,800. $206,800 was variable and the rest was fixed. We have not covered S&A variances, but never the less, the difference between what actually occurred and what should have happened (the flexible budget) can still be illuminating In this Google Sheet: (a) Prepare a standard cost card for a widget. (b) Prepare an flexible budget performance report comparing actual production/sales to a flexible budget of such sales/costs (Like #2 on the top of page 842 in our text) (c) Prepare the direct material variances (price and efficiency/quantity) for each material (d) Prepare the direct labor variances (price/rate and efficiency) ESAN SABER 23 24 29 34 104 Sales Budget 3rd Quarter 105 July Total September 3rd Quarter August 106 107 108 Sales in Units Selling Price per Unit Total Sales in s 4,000 X 80 320,000 20,000 X 80 1,600,000 12,000 X 80 960,000 109 36,000 X 80 2,880,000 110 111 112 Vaughan Company RM Budget 3rd Quarter 113 July August Total September 3rd Quarter 114 115 116 117 118 119 Required Production RM per Unit Production Needs Add: Desired End Inventory Total Needs Less: Beginning Inventory RM to be purchased Cost of RM per pound Cost of RM to be purchased 5,600 X 0.6 3,360 4,608 7,968 (1,344) 6,624 X $12.00 79,488 120 19,200 X 0.6 11,520 2,688 14,208 (4,608) 9,600 X $12.00 115,200 11,200 X 0.6 6,720 1,008 7,728 (2,688) 5,040 X $12.00 60,480 36,000 X 0.6 21,600 1,008 22,608 (1,344) 21,264 X $12.00 255,168 721 129 123 124 125 126 Vaughan Company DL Budget 3rd Quarter 127 128 July August Total September 3rd Quarter 129 130 731 Budgeted Production in Units DLH per Unit Total DLH needed Cost per DLH Total Direct Labor Cost 132 135 734 5,600 X2 11,200 X 15 168,000 19,200 X2 38,400 X 15 576,000 11,200 X2 22,400 X 15 336,000 36,000 X2 72,000 X 15 1,080,000 735 Vaughan Company FOH Budget 3rd Quarter Total 3rd Quarter July August September 38,400 X $2 76,800 Budgeted DLH Variable FOH rate Total Variable FOH Fixed FOH Total FOH Less: Depreciation Cash Needed for FOH 11,200 X $2 22,400 7,200 29,600 (5,000) 24,600 7,200 84,000 (5,000) 79,000 22,400 X S2 44,800 7,200 52,000 (5,000) 47,000 72,000 X $2 144,000 21,600 165,600 (15,000) 150,600 Total FOH per Budget Budgeted DLH this period Predetermined FOH per DLH $ 165,600 72,000 S 2.30 Vaughan Company S&A Budget 3rd Quarter Total July August September 3rd Quarter Budgeted Sales in units Variable S&A Expenses Budgeted Variable S&A Exp. Budgeted Fixed S&A Total Selling & Admin. Less: Depreciation Less: Bad Debt Expense Budgeted Cash S&A Expenses 4,000 X $7.00 28,000 32,000 60,000 (3,000) (16,000) 41,000 20,000 X $7.00 140,000 32,000 172,000 (3,000) (80,000) 89,000 12,000 X $7.00 84,000 32,000 116,000 (3,000) (48,000) 65,000 36.000 X $7.00 252,000 96,000 348,000 (9.000) (144,000) 195,000 Vaughan Company Cash Budget 3rd Quarter July August September 50,000 168,573 50,515 424,000 474,000 560,000 728,573 1,392,000 1,442,515 Beginning Cash Balance Add: Cash Receipts Total Cash Available Less: Disbursements Direct Materials WHAM Direct Labor FOH S&A Expenses Total Disbursements Cash Balance (Deficit) Borrowings RePayments Interest Ending Cash Balance 71,827 168,000 24,600 41,000 305,427 168,573 108,058 576,000 79,000 89,000 852,058 (123,485) 174,000 71,424 336,000 47,000 65,000 519,424 923,091 (174,000) (2,610) 746,481 168,573 50,515 6 57 Vaughan Company Budgeted Income Statement 3rd Quarter July Total September ||3rd Quarter August 89 90 191 192 Sales Less: CGS Gross Margin Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 320,000 (167,200) 152,800 (60,000) 92,800 1,600,000 (836,000) 764,000 (172,000) 592,000 193 960,000 (501,600) 458,400 (116,000) 342.400 (2.610) 339.790 194 2.880,000 (1,504,800) 1,375,200 (348,000) 1,027,200 (2,610) 1.024,590 195 196 92,800 592,000 197 no a. Cost Total Standard Cost Card Quantity Direct Material WHAM Direct Labor Factory Overhead Total Cost 3 b. Actual Production and Sales Flexible Budget Flexible Budget Variance 13 14 15 Units Sales 16 17 15 Variable Costs: 19 20 21 22 23 24 25 26 22 28 29 30 31 Direct Materials WHAM Direct Labor Variable FOH Variable S&A Interest Expense Contribution Margin Fixed Costs - FOH Fixed Costs - S&A Operating Income C. Direct Material WHAM Price Quantity/Efficiency 2. 13 44 Totals 45 Price Efficiency Total 46 47 d. Direct Labor g 699 58 Price/Rate Efficiency Totals Price Efficiency Total