A B D F H 125 Vaughan Company 126 DL Budget Total 127 3rd Quarter July August September 3rd Quarter 128 129 Budgeted Production in Units 7,500 17,250 12,500 37,250 130 DLH per Unit X 0.8 X 0.8 X 0.8 X 0.8 131 Total DLH needed 6,000 13,800 10,000 29,800 132 Cost per DLH X 13 X 13 X 13 X 13 133 Total Direct Labor Cost 78,000 179,400 130,000 387,400 134 135 Vaughan Company 136 FOH Budget Total 137 3rd Quarter July August September 3rd Quarter 138 139 Budgeted DLH 6,000 13,800 10,000 29,800 140 Variable FOH rate X $1.50 X $1.50 X $1.50 X $1.50 141 Total Variable FOH 9,000 20,700 15,000 44,700 142 Fixed FOH 7,450 7,450 7,450 22,350 143 Total FOH 16,450 28,150 22,450 67,050 144 Less: Depreciation (6,000) (6,000) '6,000) (18,000) 145 Cash Needed for FOH 10,450 22,150 16,450 49,050 146 147 Total FOH per Budget $ 67,050 148 Budgeted DLH this period 29,800 149 Predetermined FOH per DLH $ 2.25 150A B D F H Flexible Budget and Standard Cost Project 2 a. 3 Standard Cost Card Quantity Cost Total Direct Material WHAM 3.0075 1.85 5.56 6 Direct Labor 1.333333333 15.66666667 20.89 7 Factory Overhead 1.333333333 1.566666667 2.09 8 9 Total Cost 28.54 10 11 b. 12 Actual Flexible 13 Flexible Production Budget 14 Budget and Sales Variance 15 Units 15,000 15,000 16 Sales $ 888,000 $ 900,000 17 18 Variable Costs: 19 20 Direct Materials WHAM $ 83,458 $ 81,000 2,458 21 Direct Labor $ 313,333 $ 156,000 157,333 22 Variable FOH $ 31,333 $ 22,500 8,833 23 Variable S&A $ 120,750 $ 120,000 $ 750 24 Interest Expense $ 6,000 $ 6,000 25 26 Contribution Margin $ 333,125 $ 514,500 (181,375) 27 28 Fixed Costs - FOH $ 6,567 $ 7,450 (883 29 Fixed Costs - S&A $ 148,500 $ 131,000 17,500 30 31 Operating Income $ 178,059 $ 376,050 (197,991) 32 33 34 C. Direct Material WHAM 35 36 37 38 39 40 Price Quantity / Efficiency 41 42 43 44 Totals 45 Price Efficiency Total 46 47 d. Direct Labor AR 49 50 51 53 Price/ Rate Efficiency 54 55 56 Totals 57 Price Efficiency Total 58A B D F H 151 Vaughan Company 152 S&A Budget Total 153 3rd Quarter July August September 3rd Quarter 154 155 Budgeted Sales in units 4,000 18,000 15,000 37,000 156 Variable S&A Expenses X $8.00 X $8.00 X $8.00 X $8.00 157 Budgeted Variable S&A Exp. 32,000 144,000 120,000 296,000 158 Budgeted Fixed S&A 131,000 131,000 131,000 393,000 159 Total Selling & Admin. 163,000 275,000 251,000 689,000 160 Less: Depreciation (3,000) (3,000) (3,000) (9,000) 161 Less: Bad Debt Expense (12,000) (54,000) (45,000) (111,000) 162 Budgeted Cash S&A Expenses 148,000 218,000 203,000 569,000 163 164 Cash Budget 165 166 Vaughan Company 167 Cash Budget 168 3rd Quarter July August September 169 170 Beginning Cash Balance 50,000 50,265 284,013 171 Add: 172 Cash Receipts 270,000 732,000 918,000 173 Total Cash Available 320,000 782,265 1,202,013 174 Less: Disbursements 175 Direct Materials WHAM 39,285 72,657 74,385 176 Direct Labor 78,000 179,400 130,000 177 FOH 10,450 22,150 16,450 178 S&A Expenses 148,000 218,000 203,000 179 Total Disbursements 275,735 492,207 423,835 180 Cash Balance (Deficit) 44,265 290,058 778,178 181 Borrowings 6,000 182 RePayments (6,000) 183 Interest 45 184 Ending Cash Balance 50,265 284,013 778,178 185 186 Vaughan Company 187 Budgeted Income Statement Total 188 3rd Quarter July August September 3rd Quarter 189 190 Sales 240,000 1,080,000 900,000 2,220,000 191 Less: CGS 70,400) (316,800 (264,000) (651,200) 192 Gross Margin 169,600 763,200 636,000 1,568,800 193 Less: S&A Expenses 163,000) (275,000) (251,000) 689,000) 194 Net Operating Income 6,600 488,200 385,000 879,800 195 Less: Interest Expense (45 45 196 Net Income 6,600 188,155 385,000 879,755BUSAD 202 Flexible Budgeting and Standard Cost Project Group D Vaughan Company had a fantastic sales 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 $2,368,000 for 40,000 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 W'I-IAM during the quarter. Total Production for 3rd quarter was 40,000 units. Vaughan uses LIFO inventory method. Regarding WHAM, Vaughan purchased and used 120,300 pounds at a total cost of $222,555. Vaughan used 30,000 DLH (direct labor hours) to make the 40,000 units at a total labor cost of $470,000. Actual Variable FOH was $47,000 and actual Fixed FOH was $19,700. Even though Production ended up being 40,000 units, the cash borrowings indicated by the static budget dictated that Vaughan borrow money ($6,000) on the last day of July and they did so. They also paid it back at the end of the August as budgeted. Selling and Administrative expenses totaled $718,000. $322,000 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 exible 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 exible budget of such sales 7 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 ((1) Prepare the direct labor variances (price / rate and efficiency) (e) Prepare the Variable (spending 8:: efficiency} and Fixed FOH (budget/ spending 3: volume) variances. (refer to the appendix for the factory overhead variances) (f) 1What should management be looking into for further investigation? (g) Do you think they should have waited until the end of the quarter to analyze the differences between actual results and planned results? 1Why or why not? (h) Is FOH over or underapplied? And by how much? Draw a Taccount and show FOH. Does your answer match with the answers you calculated for Variable and Fixed FOII variances? A B D F H 59 e . Variable FOH 61 62 63 GA 65 Spending Efficiency 66 67 68 Totals 69 Spending Efficiency Total 70 71 Fixed FOH 73 74 75 76 77 Budget/Spending Volume 78 79 80 f. What should management be looking into for further investigation? 81 82 83 84 g. Do you think they should have waited until the end of the year to analyze the differences 85 between actual results and planned results? Why or why not? 86 87 88 89 h. Is FOH over or underapplied? And by how much? Draw a T-account and show FOH. 90 Does your answer match with the answers you calculated for Variable and Fixed FOH variances? 91 92 FOH VFOH Spending 93 VFOH Efficiency 94 FFOH Spending 95 FFOH Volume 96 97 Inserted for reference: 98 99 Master Budget 100 101 Sales Budget 102 103 Vaughan Company 104 Sales Budget Total 105 3rd Quarter July August September 3rd Quarter 106 107 Sales in Units 4,000 18,000 15,000 37,000 108 Selling Price per Unit X 60 X 60 X 60 X 60 109 Total Sales in $ 240,000 1,080,000 900,000 2,220,000 110 111 Vaughan Company 112 RM Budget Total 113 3rd Quarter July August September 3rd Quarter 114 115 Required Production 7,500 17,250 12,500 37,250 116 RM per Unit X 3 X 3 X 3 X 3 117 Production Needs 22,500 51,750 37,500 111,750 118 Add: Desired End Inventory 5,175 3,750 1,575 1,575 119 Total Needs 27,675 55,500 39,075 113,325 120 Less: Beginning Inventory (2,250) (5,175) 3,750) (2,250) 121 RM to be Purchased 25,425 50,325 35,325 111,075 122 Cost of RM per pound X $1.80 X $1.80 X $1.80 X $1.80 123 Cost of RM to be Purchased 45,765 90,585 63,585 199,935