Activity Flexible Budgeting, Performance Report, Volume Variance

Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $18,000 per year per forklift. Novo employs 25 forklift operators who receive an average salary of $50,000 per year, including benefits. Each move requires the use of a crate. The crates are used to store the parts and are emptied only when used in production. Crates are disposed of after one cycle (two moves), where a cycle is defined as a move from receiving to stores to production. Each crate costs $1.80. Fuel for a forklift costs $3.60 per gallon. A gallon of gas is used every 20 moves. Forklifts can make three moves per hour and are available for 280 days per year, 24 hours per day (the remaining time is downtime for various reasons). Each operator works 40 hours per week and 50 weeks per year.

Required:

1. Prepare a flexible budget for the activity of moving materials, using the number of cycles as the activity driver. If required, round your answers to the nearest cent.

Novo, Inc. Flexible Budget
	Formula
Resource	Fixed	Variable
Crates	$fill in the blank 6044a1079058fa3_2
Fuel	fill in the blank 6044a1079058fa3_4
Lease		$fill in the blank 6044a1079058fa3_6
Salaries		fill in the blank 6044a1079058fa3_8
Total	$fill in the blank 6044a1079058fa3_9	$fill in the blank 6044a1079058fa3_10

Feedback

2. Calculate the activity capacity for moving materials. fill in the blank 67ad01054fe1fb8_1 cycles

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Suppose Novo works at 80 percent of activity capacity and incurs the following costs:

Salaries	$1,290,000
Leases	144,000
Crates	118,000
Fuel	24,000

Prepare the budget for the 80 percent level for the moving materials activity. If required, round your answers to the nearest cent.

Novo, Inc.
Budget for the 80 percent level
	Formula
Resource	Fixed	Variable	60,000 Cycles (Activity Output)
	$fill in the blank a0036aff7054fcb_2		$fill in the blank a0036aff7054fcb_3
	fill in the blank a0036aff7054fcb_5		fill in the blank a0036aff7054fcb_6
		$fill in the blank a0036aff7054fcb_8	fill in the blank a0036aff7054fcb_9
		fill in the blank a0036aff7054fcb_11	fill in the blank a0036aff7054fcb_12
Total	$fill in the blank a0036aff7054fcb_13	$fill in the blank a0036aff7054fcb_14	$fill in the blank a0036aff7054fcb_15

Feedback

Prepare a performance report for the moving materials activity. If an amount is zero, enter "0". Select "N/A" if there is no variance.

Novo, Inc.
Performance Report
For the Year 20XX
Resource	Actual Costs	Budgeted Costs	Budget Variance	Favorable (F) or Unfavorable (U)
	$fill in the blank 3eb9c602300ff8f_2	$fill in the blank 3eb9c602300ff8f_3	$fill in the blank 3eb9c602300ff8f_4	Unfavorable
	fill in the blank 3eb9c602300ff8f_7	fill in the blank 3eb9c602300ff8f_8	fill in the blank 3eb9c602300ff8f_9	Unfavorable
	fill in the blank 3eb9c602300ff8f_12	fill in the blank 3eb9c602300ff8f_13	fill in the blank 3eb9c602300ff8f_14	N/A
	fill in the blank 3eb9c602300ff8f_17	fill in the blank 3eb9c602300ff8f_18	fill in the blank 3eb9c602300ff8f_19	Unfavorable
Total	$fill in the blank 3eb9c602300ff8f_21	$fill in the blank 3eb9c602300ff8f_22	$fill in the blank 3eb9c602300ff8f_23	Unfavorable

Feedback

3. Calculate the amount of the volume variance for moving materials. $fill in the blank 8f18ca01efc2fef_1

4. Suppose that a redesign of the plant layout reduces the demand for moving materials to one-third of the original capacity. What is the budgeted cost for this new activity level? When making your calculations, round the number of required operators and the number of required forklifts to the next higher number (for example, a computed value of 6.2 rounds to 7). If required, round your answers to the nearest cent.

Budgeted Cost for New Activity Level
	Formula
Resource	Fixed	Variable	25,000 Cycles (Activity Output)
	$fill in the blank 465c9807efa2f85_2		$fill in the blank 465c9807efa2f85_3
	fill in the blank 465c9807efa2f85_5		fill in the blank 465c9807efa2f85_6
		$fill in the blank 465c9807efa2f85_8	fill in the blank 465c9807efa2f85_9
		fill in the blank 465c9807efa2f85_11	fill in the blank 465c9807efa2f85_12
Total	$fill in the blank 465c9807efa2f85_13	$fill in the blank 465c9807efa2f85_14	$fill in the blank 465c9807efa2f85_15

Has activity performance improved? Yes