A.

Messenger, Inc. has a standard variable overhead rate of $7 per machine hour, with each completed unit expected to take 2 machine hours to produce. A review of the company's accounting records found the following: Actual production: 21,000 units Variableoverhead efciency variance: $10,500U Variableoverhead spending variance: $22,500F What was Messenger's actual variable overhead during the period? O $282,000. O $261,000. O $327,000 C $306,000. O None of the answers is correct.Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected total output of 600,000 units requiring 3,000,000 machine hours. The company is able to schedule production uniformly throughout the year. Machine hours is the cost driver for overhead costs. A total of 60,000 units requiring 255,000 machine hours were produced during May. Actual overhead costs for May amounted to $665,000. The actual costs, as compared to the annual budget and to onetwelfth ofthe annual budget. are as follows: NEWARK PLASTICS CORPORATION Annual Budget Total Per Per Machine Monthly Actual Costs Amount Unit Hour Budget for May Variable overhead: Indirect material $1,988,888 $ 3.38 $8.66 $165,888 $183,888 Indirect labor 1,388,888 2.38 8.46 115,888 115,888 Fixed overhead: Supervision 1,299,999 2.99 9.49 199,999 94,999 Utilities 1,148,888 1.98 8.38 95,888 113,888 Depreciation 1,929,999 3.29 9.64 199,999 199,999 Total $7,628,888 $12.?8 $2.54 $635,888 $665,888 Required: 1. Prepare a schedule showing the following amounts for Newark Plastics for May. a. Applied overhead costs. b. Variableoverhead spending variance. c. Fixedoverhead budget variance. 0'. Variableoverhead efciency variance. e. Fixedoverhead volume variance. Required 1 Required 2 Required 4 Required 5 Prepare a revised expense variance report for September, which is based on the flexible budget prepared in part (1). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "per air mile'I answers to 2 decimal places.) Total variable expenses Fixed expenses: Per Month Total xed expenses $ 0 $ 0 $ 0 Total expenses Chillco Corporation produces containers of frozen food. During April. Chillco produced 815 cases of food and incurred the following actual costs. Variable overhead $ 7,588 Fixed overhead 18,988 Actual labor cost (3,588 direct-labor hours) ?1,488 Actual material cost (1?,888 pounds purchased and used} 44,288 Overhead is budgeted and applied using directlabor hours in a standard costing system. Standard cost and annual budget information are as follows: Standard Costs per Case Direct labor (4 hours at $28 per hour} $ 88.88 Direct material (28 pounds at $2.48 per pound) 48.88 Variable overhead (4 directlabor hours at $2.68 per hour) 18.48 Fixed overhead (4 direct-labor hours at $3 per hour) 12.88 Total $1.53 .49 Annual Budget Information Variable overhead $184,888 Fixed overhead $128,888 Planned activity for year 48,888directilabor hours Direct-material price variance $ 3,400 Unfavorable Direct-material purchase price variance $ 1,680 Unfavorable Direct-material quantity variance $ 1,680 Unfavorable Direct-labor rate variance $ 1,400 Unfavorable Direct-labor efficiency variance 4,800 Unfavorable Variable-overhead spending variance $ 1,610 Favorable Variable-overhead efficiency variance $ 624.00 Unfavorable Fixed-overhead budget variance $ 1,610 Unfavorable Fixed-overhead volume variance $ 1,610 UnfavorableReq 1A Req 1B and 1D Req 1C and 1E Variable-overhead Spending Variance and Efficiency Variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "Projected Overhead" and "Flexible Budget" to 2 decimal places.) Budgeted Flexible Budget Variable Overhead Actual Overhead Spending Variance Overhead at Efficiency Variance (Applied Actual Hours Overhead) Indirect labor $ 115,000 Indirect material 183,000 0.00 $ 0.00 Machine hours $ 298,000 $ 12,400 Unfavorable $ 0 Favorable 0Req 1A Req 1B and 1D Req 1C and 1E Fixed-overhead Budget Variance and Volume Variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "Applied Overhead" to 2 decimal places.) Fixed Overhead Actual Budget Variance Flexible Volume Overhead Budget Variance Applied Overhead $ 0.00 Machine hours $ 0 $ 0 $ 0Mark Fletcher, president of SoftGro, lnc., was looking forward to seeing the performance reports for November because he knew the company's sales for the month had exceeded budget by a considerable margin. SoGro, a distributor of educational software packages. had been growing steadily for approximately two years. Fletcher's biggest challenge at this point was to ensure that the company did not lose control of expenses during this growth period. When Fletcher received the November reports. he was dismayed to see the large unfavorable variance in the company's Monthly Selling Expense Report that follows. SOFTGRO, INC. Monthly Selling Expense Report For the Month of November Annual November November November Budget Budget Actual Variance Unit sales 2,323,333 284,333 335,333 22,333 Dollar sales $121,233,333 $17,343,333 $18,353,333 $1,323,333 Orders processed 66,888 7,588 6,888 (7'88) Sales personnel per month 98 98 96 (6) Advertising $ 23,533,333 $ 2,333,333 $ 2,315,333 $ 15,333u staff salaries 3,333,333 253,333 253,333 Sales salaries 2,592,333 215,333 232,333 15,333u Commissions 4,848,333 581,533 734,433 52,833u Per diem expense 3,888,888 324,888 358,588 26,588U office expenses ?,332,333 585,333 521,833 35,833u Shipping expenses 11,624,888 1,543,888 1,625,888 78,888U Total expenses $ 59,584,888 $ 5,984,688 $ 6,129,788 $ 225,188U Fletcher called in the company's new controller, Susan Porter, to discuss the implications of the variances reported for November and to plan a strategy for improving performance. Porter suggested that the company's reporting format might not be giving Fletcher a true picture ofthe company's operations. She proposed that SoftGro implement exible budgeting. Porter offered to redo the Monthly Selling Expense Report for November using flexible budgeting so that Fletcher could compare the two reports and see the advantages of flexible budgeting. Porter discovered the following information about the behavior of SoftGro's selling expenses. The total compensation paid to the sales force consists of a monthly base salary and a commission; the commission varies with sales dollars. Sales office expense is a semivariable cost with the variable portion related to the number of orders processed. The fixed portion of ofce expense is $4,920,000 annually and is incurred uniformly throughout the year. Subsequent to the adoption of the annual budget for the current year, SoftGro decided to open a new sales territory. As a consequence, approval was given to hire six additional salespeople effective November 1. Porter decided that these additional six people should be recognized in her revised report. Per diem reimbursement to the sales force. while a fixed amount per day, is variable with the number of sales personnel and the number of days spent traveling. SoGro's original budget was based on an average sales force of 90 people throughout the year with each salesperson traveling 15 days per month. The company's shipping expense is a semivariable cost with the variable portion, $5.00 per unit, dependent on the number of units sold. The xed portion is incurred uniformly throughout the year. Required: 1. Why would Susan Porter propose that SoGro use flexible budgeting in this situation? 2. Prepare a revised Monthly Selling Expense Report for November that would permit Mark Fletcher to more clearly evaluate SoGro's control over selling expenses. Required 1 Required 2 Prepare a revised Monthly Selling Expense Report for November that would permit Mark Fletcher to more clearly evaluate SoftGro's control over selling expenses. {Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance}. Do not round intermediate calculations.) ll_l_m ll_l_ll ll_l_ll _ll_l_ll _ll_l_ll _ll_l_ll '_ll_l_ll Total 9 xpen ses Flaming Foliage Sky Tours is a small sightseeing tour company in New Hampshire. The rm specializes in aerial tours ofthe New England countryside during September and October. when the fall color is at its peak. Until recently, the company had not had an accounting department. Routine bookkeeping tasks, such as billing, had been handled by an individual who had little formal training in accounting. As the business began to grow, however, the owner recognized the need for more formal accounting procedures. Jacqueline Frost has recently been hired as the new controller, and she will have the authority to hire an assistant. During her rst week on thejob. Frost was given the following performance report. The report was prepared by Red Leif, the company's manager of aircraft operations, who was planning to present it to the owner the next morning. \"Look at these favorable variances for fuel and so forth.\" Leif pointed out, as he showed the report to Frost. \"My operations people are really doing a greatjob.\" Later that day, Frost looked at the performance report more carefully. She immediately realized that it was improperly prepared and would be misleading to the company's owner. Passenger revenue . 58 $468, 888 $494, 588 $34, 588 U Less: Variable expenses: Fuel $ 1.68 $ 6?,988 $ 68,888 $ 988 F Aircraft maintenance 2.25 8?, 588 96,?58 9,258 F Flight crew salaries 1.68 64, 3'88 68,888 4,188 F Selling and ad-inistrative 2.?8 186,988 116,188 9,288 F Total variable expenses $ 8.15 $322,888 $358,458 $23,458 F Contribution margin $ 3.35 $133,888 $144,858 $11,858 U Less: Fixed expenses: Per Month Depreciation on aircraft $ 18, 288 $ 18, 288 $ 18, 288 $ 8 Landing fees 4, 288 4, 588 4, 288 388 U Supervisory salaries 39,888 35,888 39,888 4, 888 F Selling and adlinistrative 48,888 53,?88 48,888 5,?88U Total fixed expenses $181,488 $183,488 $181,488 $ 2,888 U Operating incone $ 29,688 $ 42,658 $13,858 U Required 1 Required 2 Required 4 Required 5 Prepare a columnar flexible budget for Flaming Foliage Sky Tours' expenses, using air miles as the cost driver at the following activity levels: 40,000 air miles, 43,000 air miles, and 46,000 air miles. Activity Level (Air Miles) 40,000 43,000 46,000 Variable expenses: Total variable expenses $ 0 $ $ 0 Fixed expenses: Total fixed expenses $ 0 $ 0 $ 0 Total expenses