B C D a 3 4 5 G H BUSAD 202 Flexible Budgeting and Standard Cost Project Group C 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 happenec 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 5303,800 $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 flexible budget of such sales/costs (Like #2 on the top of page 842 in our text) () Prepare the direct material variances (price and efficiency/quantity) for each material (d) Prepare the direct labor variances (price/rato and efficiency) 6 17 18 19 22 23 26 = a + 99 Master Budget 100 101 Sales Budget 102 103 104 Vaughan Company Sales Budget 3rd Quarter 105 Total September (3rd Quarter July August 306 107 108 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 2,880,000 109 110 132 112 Vaughan Company RM Budget 3rd Quarter 113 July Total September 3rd Quarter August 114 715 116 117 118 719 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 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 (1,314) 21,264 X $12.00 255,168 120 121 122 120 124 125 125 Vaughan Company DL Budget 3rd Quarter 127 July August Total September 3rd Quarter 128 129 130 131 Budgeted Production in Units DLH per Unit Total DLH needed Cost per DLH Total Direct Labor Cost 5,600 X2 11.200 X 15 168,000 19,200 X2 38,400 X 15 576,000 11,200 X2 22.400 X 15 336,000 36,000 X2 72,000 X 15 1,080,000 132 133 134 Vaughan Company FOH Budget 3rd Quarter Total September 3rd Quarter July August Budgeted DLH Variable FOH rate Total Variable FOH Fixed FOH Total FOH Less: Depreciation Cash Needed for FOH 11,200 X S2 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 S2 44,800 7,200 52,000 (5,000) 47,000 72,000 X $2 144,000 21,600 165,600 (15,000) 150,600 Total FOH per Budget Budgeted DLH this period Predetermined FOH per DLH $ 165,600 72,000 2.30 $ Vaughan Company S&A Budget 3rd Quarter 3 Total September ( 3rd Quarter July August 54 55 156 57 158 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 S&A Expenses 4,000 X $7.00 28,000 32,000 60,000 (3.000) (16,000) 41,000 159 20,000 X $7.00 140,000 32,000 172,000 (3,000) (80,000) 89,000 12,000 X $7.00 84,000 32,000 116,000 (3,000) (48,000) 65,000 36,000 X $7.00 252,000 96,000 348,000 (9,000) (144,000) 195,000 160 161 162 163 164 Cash Budget 765 766 167 Vaughan Company Cash Budget 3rd Quarter 168 July August September 169 170 50,000 168,573 50,515 171 172 424,000 474,000 560,000 728,573 1,392,000 1,442,515 173 174 175 176 177 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 Interest Ending Cash Balance 178 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 65,000 519,424 923,091 179 180 181 182 183 (174,000) (2,610) 746,481 184 168,573 50,515 185 186 187 Vaughan Company Budgeted Income Statement 3rd Quarter 188 July August 189 190 197 192 Sales Less: CGS Gross Margin Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 320,000 (167,200) 152,800 (60,000) 92.800 1,600,000 (836,000) 764,000 (172,000) 592,000 Total September 3rd Quarter 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 1,024,590 193 194 195 156 92,800 592,000 197 198 a. Standard Cost Card Quantity Cost Total 5 0.6 Direct Material WHAM Direct Labor Factory Overhead 12 15 7.20 30.00 6 2 2 8 9 Total Cost 10 11 b. 12 13 Flexible Budget Variance Actual Flexible Production Budget and Sales 30,000 30,000 $ 2,400,000 | S 2,340,000 14 15 Units Sales 16 60,000 Variable Costs: 18 19 20 21 22 23 24 25 26 22 20 29 30 31 32 33 Direct Materials WHAM Direct Labor Variable FOH Variable S&A Interest Expense Contribution Margin Fixed Costs - FOH Fixed Costs - S&A $ (216,000) $ (239,010) Vio $ (900,000) || $ (895,400) 1600 $ (120,000) $ (121,000) 1.000 $ (210,000) $ (206,800 $ 3,200 $ (174,000$ (174,000) $ 780,000 $ 703,790 76,210 $ (21,600) $ (21,000) 600 $ (96,000) $ 97,000) | 1,000 $662,400 $ 585,790 76,610 Operating Income C. Direct Material WHAM Price Quantity Efficiency 2 13 44 Totals 45 Price Efficiency Total 46 47 d. Direct Labor 49 51 2698 53 Price/Rate Efficiency 54 55 56 Totals 57 Price Efficiency Total 58