3 4 5 6 7 8 9 10 11 12 13 14 15 Vaughan Company had a dismal 3rd Quarterl 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 5303,800. $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) (e) Prepare the direct material variances (price and efficiency/quantity) for each material (d) Prepare the direct labor variances (price/ rate and efficiency) () Prepare the Variable (spending & efficiency) and Fixed FOH (budget/spending & volume) variances. (refer to the appendix for the factory overhead variances) 24 25 26 = = = = 30 37 40 1413 Inserted for reference: Master Budget Sales Budget 3 14 Vaughan Company Sales Budget 3rd Quarter Total September 3rd Quarter 35 July August 06 07 108 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 36,000 X 80 2.880,000 109 110 111 112 Total September | 3rd Quarter 113 July August 114 115 116 117 Vaughan Company RM Budget 3rd Quarter 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 118 119 120 5,600 X 0.6 3,360 4,608 7.968 (1,344) 6,624 X $12.00 79,488 19,200 X 0.6 11,520 2,68 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 $12.00 255,168 121 122 123 124 125 126 Vaughan Company DL Budget 3rd Quarter Total 3rd Quarter 127 July August September 125 129 130 5,600 X2 131 Budgeted Production in Unit: DLH per Unit Total DLH needed Cost per DLH Total Direct Labor Cost 19,200 X2 38,400 X 15 576,000 11,200 X 15 168,000 11,200 X2 22.400 X 15 336.000 36,000 X2 72.000 X 15 1,080.000 132 733 B Total September 3rd Quarter August Vaughan Company FOH Budget 3rd Quarter July 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 38,400 X S2 76,800 7,200 84,000 (5,000) 79,000 22,400 X $2 $ 44,800 7,200 52,000 (5,000) 47,000 72,000 X $2 144,000 21,600 165,600 (15,000) 150,600 14 145 $ 165,600 72,000 2.30 146 147 148 Total FOH per Budget Budgeted DLH this period Predetermined FOH per DLH 149 150 Total September 3rd Quarter 151 Vaughan Company S&A Budget 3rd Quarter 152 July August 753 154 155 156 4,000 X $7.00 28,000 32,000 60,000 (3,000) (16,000) 41,000 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 SEA Fxpenses 152 12,000 X $7.00 84,000 32,000 116,000 (3,000) (48,000) 65,000 20,000 X $7.00 140,000 32,000 172.000 (3,000) (80,000) 89,000 36,000 X $7.00 252,000 96,000 348,000 (9,000) (144,000 195,000 158 159 160 161 162 Cash Budget 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 9 09 31 82 383 (174,000) (2,610) 746,481 184 168,573 50,515 185 186 782 Vaughan Company Budgeted Income Statement 3rd Quarter 188 189 190 July August Total September 3rd Quarter 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) 592.000 190 960,000 2,880,000 (501,600)| (1,504,800) 458,400 1,375,200 (116,000) (348,000) 342.400 1,027,200 (2.610) (2,610) 339,790 1,024,590 195 196 92,800 13 592.000 199 fx Flexible Budget D B A Flexible Budget and Standard Cost Project Total Cost a. Quantity Standard Cost Card 0.6 12 15 2.30 WN 7.20 30.00 4.60 Direct Material WHAM Direct Labor Factory Overhead 2 $ $ 2 41.80 Total Cost 10 11 b. Flexible Budget Variance 12 13 Actual Flexible Production Budget and Sales 30,000 30,000 $ 2,400,000 $ 2,340,000 14 15 Units Sales 60,000 16 17 18 Variable Costs: 19 20 23,010 4,600 1,000 3,200 21 22 23 Direct Materials WHAM Direct Labor Variable FOH Variable S&A Interest Expense Contribution Margin Fixed Costs - FOH Fixed Costs - S&A 24 25 26 27 28 29 30 31 32 $ (216,000) || $ (239,010) $ (900,000)|| S (895,400) $ (120,000) $ (121,000) $ (210,000) $ (206,800 $ $ (174,000) $ (174,000) $ 780,000 $ 703,790 $ (21,600) $ (21,000) $(96,000) $ (97,000) $662,400 $ 585,790 76,210 600 1,000 76,610 Operating Income C. Direct Material WHAM 20 40 Price Quantity Efficiency 30,000 $239,010.00 30,000 $216,000.00 41 57.97 57.20 Actual Standard 43 Totals 50.77 S 44 30,000 Efficiency 523,010.00 Total Price 45 46 47 d. Direct Labor 49 90 2 54 S 55 56 Price/Rate Efficiency $895,400.00 $1,815,000.00 $1,815,000.00 $ 900,000 AOXAP AO.GP A015 SOSP Totals -5919,600.00 $915,000.00 51.600.00 Price Efficiency Total 52 50 98 Variable FOH 69 63 Spending Efficiency Totals Spending Efficiency Total 70 71 Foed TOH 74 Budget Spending Volume 600