Flexible Budget Performance Report Project Kelseys Frozen Confectionaries buys and distributes single-serve ice cream treats, popsicles, etc., such as those sold at convenience stores, sporting events and amusement parks. Download the file containing Kelseys budget assumptions and actual figures for June. The file also contains a draft for both a 1) master budget performance report, and 2) a flexible budget performance report. You will work in teams of two. Turn in ONE project per team. If you or your partner feels you did not share equally in the work, email me for a possible grade adjustment. Otherwise, you will both receive the same grade. Hand in this completed direction packet by ______________ at class time and email your Excel file to __ Use Flex Budget_Last Name_Last name as the subject line in the email. ALSO, put BOTH of your names on the FILE NAME of your Excel spreadsheet. DIRECTIONS for Master Budget Performance Report: Use the budget assumptions, along with Excel formulas, to populate the Master Budget column. Note: Your formulas must work such that if ANY of the budget assumptions change, the new assumptions ripple through the entire budget. Part of your grade will be based on whether you correctly formulated the cells. Do NOT TYPE A NUMBER IN ANY CELL!!! Use a formula to calculate the variance in cell H7: (Actual Budget). Copy and paste the formula to the rest of the cells in the column. Leave as positive or negative, rather than absolute values. Use a formula to calculate the Variance percentage. NOTE: The percentage is the variance as a percent of the Master Budget. Copy and paste the formula to the rest of the cells in the column Format cells appropriately (dollar signs using the accounting or currency format, underlines, double underlines, zero decimal places for dollar amounts, etc.,). Use the If statement function to show the variances as U or F. The If statement can be found under Formulas, Logical. Example: =IF(H7>=0,"F","U"). This formula means If cell H7>0 or H7=0, then mark as F. If not greater than or equal to 0, mark as U. Be careful with revenues and expense variances since youll want them to be opposite of one another. Any variance of 0 should be shown as F since it meets budget expectations. Check your answers using the following check figures: Budgeted CM= $301,000; Budgeted Op Inc. = $211,000; Variance for Commissions = $8,685; Variance percentage for Commissions = 17.4 %, Unfavorable. Answer the following questions: What is the master budget variance for Shipping exp.? $_____________, ___%, U or F? What does it mean? What is the master budget variance for Lease Exp? $______________, _____%, U or F ?What does it mean? Use management by exception to determine which variances to investigate. HINT: In column K, use the If function, along with Absolute value function to find the variances that are larger than the decision rule. Also, since the decision rule is in B21 and you want Excel to always compare to B21, you need to make it an absolute reference: $B$21. For example, =IF(ABS(K7)>($B$21),"yes","no"). Now check to see if everything ripples through the budget if you change an assumption. Try changing the assumed sales volume to 20,500 and Shipping expense to $2.10 per case. You should have a new total variance for operating income of $21,287, 9.8% variance, F. Change the sales volume assumption back to $20,000 and the shipping expense assumption back to $2.00. DIRECTIONS for Flexible Budget Performance Report: Copy and Paste all of the line items (account names) from the master budget into the Flexible Budget Performance report. Copy and Paste all of the actual figures from the master budget to the actual column of the Flexible Budget Performance report. Formulate the Master Budget figures by referencing (e.g.,=B7) the appropriate cells in the first performance report. By doing so, if any assumptions change, they will ripple through BOTH performance reports. Build the Flexible Budget by using the ACTUAL SALES VOLUME achieved along with the original budget assumptions. This is very similar to building a master budget, except you are using actual sales volume. Assume the actual sales volume achieved is in the same relevant range as the original budget assumptions. Try using the accounting or currency settings to get dollar signs, commas, and brackets on negative numbers. Add underlines and double underlines as needed. Head the appropriate column for the Volume Variance and then use Excel formulas to populate the cells in that column (e.g., +H33-J33). Once you get the first cell done, copy and paste the formula to the other cells. Head the appropriate column for the Flexible Budget Variance and then use Excel formulas to populate the cells in that column (e.g. +F33-H33). Again, copy and paste the formulas to the other cells. Format the report appropriately (Dollar signs, underscores, double underscores, etc.,) Use the following check figures to check your formulas so far: Shipping Expense $44,213 $1293 $42,920 $2,920 $40,000 Lease on Distn center $15,500 $ (1,500) $17,000 $ - $17,000 To save time, we wont add the U and F designations to the flexible budget performance report. However, youll need to mentally figure out which way they go. The interpretation of the volume variance is a little problematic because it compares two budgets, rather than budget vs. actual. HINT: Think of the MASTER BUDGET as the companys target when determining whether the volume variance should be designated as a U or F. Answer the following questions: What is the Flex budget variance for operating income? $_____________ F or U? What is the Volume variance for operating income? $____________F or U? Does the combination of the flex budget variance and volume variance sum to the master budget variance for operating income? Y or N? Should it always sum to the master budget variance? Y or N? How much of the master budget variance for Sales revenue was caused by an unanticipated increase in volume?__________________ F or U? How much of the master budget variance for Commissions Exp. was caused by an unanticipated increase in volume?__________________ F or U? How much of the master budget variance for Advertising Expenses was caused by an unanticipated increase in volume?__________________ F or U? How much of the master budget variance for CGS was caused by some factor other than volume? (Hint: this is NOT a manufacturing business). $__________ F or U? What could account for this variance? How much of the master budget variance for Sales Revenue was caused by some factor other than volume? $__________ F or U? What could account for this variance? How much of the master budget variance for Advertising Exp. was caused by some factor other than volume? $__________ F or U? What could account for this variance?