B BUSAD 202 Flexible Budgeting and Standard Cost Project Group C a 7 8 9 10 12 13 14 15 16 17 18 19 20 Vaughan Company had a dismal 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 $2,340,000 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 $303,800. $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 fleable 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) (e) Prepare the Variable (spending & efficiency) and Fixed FOH (budget/spending & volume) variances. (refer to the appendix for the factory overhead variances) (1) What 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? Why or why not? (h) Is FOH over or underapplied? And by how much? Draw a T-account and show FOH. Does your answer match with the answers you calculated for Variable and Fred FOH vanances? 21 22 23 24 25 = B2" Bhuowan %n%m%nam 27 28 30 31 32 33 34 35 30 37 38 40 45 44 45 Inserted for reference: Master Budget Sales Budget e 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 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 2,688 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 $12.00 255,168 121 122 123 124 125 125 Vaughan Company DL Budget 3rd Quarter Total 3rd Quarter 127 July August September 120 5,600 X2 130 131 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 12.000 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 $2 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 $ 165,600 72,000 2.30 145 146 147 148 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 August 152 July 153 154 155 156 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 4,000 X $7.00 28,000 32,000 60,000 (3,000) (16,000) 41,000 157 158 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) 195,000 159 160 161 162 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 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 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 383 Interest 184 Ending Cash Balance 185 186 Vaughan Company 782 Budgeted Income Statement 188 3rd Quarter 189 190 Sales 791 Less: CGS Gross Margin Less: S&A Expenses Net Operating Income 195 Less: Interest Expense 196 Net Income 197 (174,000) (2,610) 746,481 168,573 50,515 July August Total September | 3rd Quarter 192 320,000 (167,200) 152,800 (60,000) 92,800 1,600,000 (836,000) 764,000 (172,000) 592.000 193 960,000 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 92,800 18 592.000 198 199 x Flexible Budget au su D A Flexible Budget and Standard Cost Project Cost Total a Quantity Standard Cost Card 12 0.6 2 7.20 30.00 4.60 15 Direct Material WHAM Direct Labor Factory Overhead $ 2.30 2 41.80 Total Cost 70 b. 11 12 Flexible Budget Variance Actual Flexible Production Budget and Sales 30,000 30,000 $ 2.400.000 $ 2340,000 Units Sales 60,000 Variable Costs: 13 14 15 16 12 15 19 20 21 -22 23 24 25 26 27 23.010 41.600 1,000 3,200 Direct Materials WHAM Direct Labor Variable FOH Variable S&A Interest Expense Contribution Margin $ (216,000) S (239,010) $ (900,000) $ (895,400) $(120,000) S (121,000) $(210,000) | S (206,800) S S (174,000) S (174,000) 76,210 $ 703,790 S780.000 Fixed Costs - FOH Foxed Costs S&A ou 600 1,000 29 (21.600) S (21,000) 196.000) S (97,000) $ 662.400 S 585790 76,610 35 Operating Income 33 34 c Direct Materal WHAM 40 Quantity/Efficiency 30,000 30.000 Pne A $ 239,010 Standard S216.000 49 Totals 5 223,010 Price Efficiency Total d. Direct Labor -1 Efficiency Price/Rate 53 54 55 56 Totals Price Efficiency Total 57 58 59 e. Variable FOH 61 62 63 Spending Efficiency 65 66 67 68 Totals Efficiency Total 69 Spending 70 21 Fixed FOH 22 73 74 75 Budget/Spending Volume 77 f. What should management be looking into for further investigation? 79 30 81 B2 83 34 85 g. Do you think they should have waited until the end of the year to analyze the differences between actual results and planned results? Why or why not? 86