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 can work in teams of three. Turn in ONE project per team. If you or your partners feels you did not share equally in the work, email me for a possible grade adjustment. Otherwise, you will all receive the same grade. Hand in this completed direction packet by March 14, 2019 at class time or email your Excel file to me. ALSO, put ALL of your names on all files and the FILE NAME of your Excel spreadsheet.

DIRECTIONS for Master Budget Performance Report:

1. 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!!!

2. 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.

3. 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

4. Format cells appropriately (dollar signs using the accounting or currency format, underlines, double underlines, zero decimal places for dollar amounts, etc.,).

5. 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.

6. 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.

7. Answer the following questions:

a. What is the master budget variance for Shipping exp.?

$4213, 5%, F. It means that

b. What is the master budget variance for Lease Exp?

- $1500, -8.8%, F. It means that

8. 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").

9. 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.

10. Change the sales volume assumption back to $20,000 and the shipping expense assumption back to $2.00.

DIRECTIONS for Flexible Budget Performance Report:

1. Copy and Paste all of the line items (account names) from the master budget into the Flexible Budget Performance report.

2. Copy and Paste all of the actual figures from the master budget to the actual column of the Flexible Budget Performance report.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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

8. 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.

9. Answer the following questions:

a. What is the Flex budget variance for operating income? $_____________ F or U?

b. What is the Volume variance for operating income? $____________F or U?

c. 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?

d. How much of the master budget variance for Sales revenue was caused by an unanticipated increase in volume?__________________ F or U?

e. How much of the master budget variance for Commissions Exp. was caused by an unanticipated increase in volume?__________________ F or U?

f. How much of the master budget variance for Advertising Expenses was caused by an unanticipated increase in volume?__________________ F or U?

g. 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?

h. 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?

i. 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?

j. Auditors always look at the variances between actual and budget or actual and last year. Say you were auditing this client and they gave you the following story (below). Is the story consistent with the overall pattern of variances? Which elements of the story are consistent with the explanations? Which variances are inconsistent, or left unexplained? Be sure to analyze every line item on the budget. (SEE NEXT PAGE.)

Client Story: In order to motivate our sales force to increase sales, we decided to increase our commissions and salaries and increase marketing. At the same time, our supplier increased its prices, and we felt we could pass that cost increase on to our customers in the form of price increase. However, with the additional pressure to make sales, coupled with the increased sales price, we had to loosen credit terms on sales. We also had to lease a little more distribution space and acquire another truck to handle the volume increase. Our shipping expense relates to gasoline on deliveries. Luckily, gas prices went down from what we originally expected this year.

In the table below, classify EACH ACCOUNT on the budget according to whether the variances in the performance report are consistent or inconsistent with the clients story, or unexplained by the clients story. Place an X in the appropriate column. If the Flexible Budget Variance and Sales Volume Variance differ with respect to one account (i.e., one is consistent and one is inconsistent) then indicate which belongs in which column.

	Consistent	Inconsistent	Unexplained
Sales revenue	X
Cost of Goods Sold	X
Commission	X
Shipping Expense		X
Bad debt expense			X
Salaries	X
Lease of distribution center	X
Depreciation of fleet and equip			X
Advertising	X
Office rent, phone, internet			X

Grading Rubric

Criteria	Possible	Points Lost
Direction packet completed correctly	40
Master Budget Performance Report:	20
Correct numbers and percentages
Correct U/F
Correct Investigation decision
Formatting: Underlines/Dollar signs/blanks /% /extra decimal places removed
Flex budget spreadsheet:	20
Correct numbers
Correct column labels
Formatting: Underlines /Dollar signs/Blanks/ extra decimal places removed
Proper use of formulas: All changes to assumptions ripple through the spreadsheet	20
Total	100

Kelsey's Frozen Confectionaries Master Budget Performance Report For the month ended June 30 20,000 cases 50.00 per case Sales Revenue MASTER BUDGET Percent scld on credit 90% percent of sales ACTUAL VARIANCE F or U Investigate? Vclume (in cases 21460 30.00 per case 2.50 per case 2.00 per case 1.00% percent of credit sales Sales Revenue $1.131,020 Sales Commission Shipping Expense Bad Debt Expense Less Variable Expenses Cast of Goods Sold 682,890 58.685 44,213 Shipping Expense Bad debt expense Contribution Margin Less Fixed Expenses: Salaries Lease on Distribution center Depreciation on fleet & Equip $ 40.000 $ 17,000 $ 12.000 $10.000 $ 11.000 328.312 43,000 15,500 12,000 7,750 12,300 237,762 Salaries Lease on Dstn center Deprec. on feet/equi Office rent, phane, internet Management 15% Investigation rule Office rent, phone, ret$ Operating Income 1) If you get a series of hashmarks(######) it just means your column width is not wide enough to accomodate the number. Increase column width and/or delete extra decimal places Kelsey's Frozen Confectionaries Fexible Budget Performance Report For the month ended June 30 2. To add numbers, put your cursor on the cell where you want the answer to be. Then keystroke the addition sign (+) and then click on the cell you want add, then keystroke the addition sign again (+) and click on the second cell you want to add. Continue in the same fashion for multiple cells. Use the subtraction sign (-) for subtracting cells. If you have an array of cells to add, you can use the AutoSum button. FLEXIBLE BUDGET ACTUAL Variance Variance MASTER BUDGET Vclume (in cases 3. To multiply, use the symbol. To divide, use the symbol. Less Variable Expenses Cast of Goods Sold 4. Make use of copy paste commands when you want similar forumulas in different cells Shipping Expense Bad debt expense Contribution Margin Less Fixed Expenses: 5. Always check the logic of your results after entering formulas to make Salaries Lease on Distn center Deprec. on feet/equip Advertising Office rent, phone, rnet Operating Income Performance Report + Kelsey's Frozen Confectionaries Master Budget Performance Report For the month ended June 30 20,000 cases 50.00 per case Sales Revenue MASTER BUDGET Percent scld on credit 90% percent of sales ACTUAL VARIANCE F or U Investigate? Vclume (in cases 21460 30.00 per case 2.50 per case 2.00 per case 1.00% percent of credit sales Sales Revenue $1.131,020 Sales Commission Shipping Expense Bad Debt Expense Less Variable Expenses Cast of Goods Sold 682,890 58.685 44,213 Shipping Expense Bad debt expense Contribution Margin Less Fixed Expenses: Salaries Lease on Distribution center Depreciation on fleet & Equip $ 40.000 $ 17,000 $ 12.000 $10.000 $ 11.000 328.312 43,000 15,500 12,000 7,750 12,300 237,762 Salaries Lease on Dstn center Deprec. on feet/equi Office rent, phane, internet Management 15% Investigation rule Office rent, phone, ret$ Operating Income 1) If you get a series of hashmarks(######) it just means your column width is not wide enough to accomodate the number. Increase column width and/or delete extra decimal places Kelsey's Frozen Confectionaries Fexible Budget Performance Report For the month ended June 30 2. To add numbers, put your cursor on the cell where you want the answer to be. Then keystroke the addition sign (+) and then click on the cell you want add, then keystroke the addition sign again (+) and click on the second cell you want to add. Continue in the same fashion for multiple cells. Use the subtraction sign (-) for subtracting cells. If you have an array of cells to add, you can use the AutoSum button. FLEXIBLE BUDGET ACTUAL Variance Variance MASTER BUDGET Vclume (in cases 3. To multiply, use the symbol. To divide, use the symbol. Less Variable Expenses Cast of Goods Sold 4. Make use of copy paste commands when you want similar forumulas in different cells Shipping Expense Bad debt expense Contribution Margin Less Fixed Expenses: 5. Always check the logic of your results after entering formulas to make Salaries Lease on Distn center Deprec. on feet/equip Advertising Office rent, phone, rnet Operating Income Performance Report +