Activity-Based Flexible Budgeting

Wade Paving Company has a sealcoating activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:

Five truck-mounted sealing units, with a lease cost of $13,000 per year per unit

Ten sealcoating employees each paid a salary of $53,000 per year (A total of 12,000 sealcoating hours are supplied by the 10 workers.)

Sealcoating materials: $400 per job

Sealcoating hours: 4 hours used per job

During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs:

Lease cost: $65,000

Salaries: $545,900

Sealcoating materials: $1,134,700

Required:

Question Content Area

1. Prepare a flexible budget formula for the sealcoating activity using sealcoating hours as the driver.

Sealcoating cost

=

$fill in the blank 980a7501efe2f90_1

+

$fill in the blank 980a7501efe2f90_2

Question Content Area

2. Prepare a performance report for the sealcoating activity. In the last column of Wade Paving Company Activity-Based Performance Report, if variance amount is unfavorable select "U" , select "F", if it is Favorable and select "NA" if there is no variance.

Wade Paving Company Activity-Based Performance Report

Activity	Actual Cost	Budgeted Cost (95% level)	Budget Variance	Variance
Sealcoating:
Fixed cost	$- Select -	$- Select -	$- Select -	FUNA
Variable cost	- Select -	- Select -	- Select -	FUNA

Question Content Area

3. What if sealcoating employees were hired through outsourcing and paid $30 per hour (the sealcoating equipment is provided by Wade)? Repeat Requirement 1 for the outsourcing case.

Sealcoating cost

=

$fill in the blank a7bd8b026f9ffb9_1

+

$fill in the blank a7bd8b026f9ffb9_2