| Net operating income _________________________________________________ | Air Meals is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The companys planning budget for December appears below: | | Air Meals Planning Budget For the Month Ended December 31 | | Budgeted meals (q) | | 29,000 | | Revenue ($3.80q) | $ | 110,200 | | | | | | Expenses: | | | | Raw materials ($1.80q) | | 52,200 | | Wages and salaries ($6,100 + $0.20q) | | 11,900 | | Utilities ($1,800 + $0.05q) | | 3,250 | | Facility rent ($3,600) | | 3,600 | | Insurance ($2,100) | | 2,100 | | Miscellaneous ($700 + $0.10q) | | 3,600 | | | | | | Total expense | | 76,650 | | | | | | Net operating income | $ | 33,550 | | | | | | | | In December, 30,000 meals were actually served. The companys flexible budget for this level of activity is as follows: | | Air Meals Flexible Budget For the Month Ended December 31 | | Budgeted meals (q) | | 30,000 | | Revenue ($3.80q) | $ | 114,000 | | | | | | Expenses: | | | | Raw materials ($1.80q) | | 54,000 | | Wages and salaries ($6,100 + $0.20q) | | 12,100 | | Utilities ($1,800 + $0.05q) | | 3,300 | | Facility rent ($3,600) | | 3,600 | | Insurance ($2,100) | | 2,100 | | Miscellaneous ($700 + $0.10q) | | 3,700 | | | | | | Total expense | | 78,800 | | | | | | Net operating income | $ | 35,200 | | | | | | | | Required: | | 1. | Compute the companys activity variances for December. (Input all values as positive numbers. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) | | | Revenue Expenses Raw materials wages and salaries utilities facilty rent insurance miscellaneous Total expenses Net operating income __________________________________ | Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 3,200 chopping boards using 1,952 board feet of hardwood. The hardwood cost the company $12,883. | | The companys standards for one chopping board are 0.54 board feet of hardwood, at a cost of $7.00 per board foot. | | Required: | | 1. | According to the standards, what cost for wood should have been incurred to make 3,200 chopping blocks? How much greater or less is this than the cost that was incurred? # of chopping blocks # of board feet per chopping unit standard board feet allowed standard cost per board foot total standard cost actual cost incurred shared cost spending variance-unfavorable | | | | | 2. | Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Materials prie variance _____ _____ Materials quanity variance _____ ____ __________________________________________ | AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the companys products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 7,200 of these meals using 3,500 direct labor-hours. The company paid these direct labor workers a total of $31,500 for this work, or $9.00 per hour. | | According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $8.50 per hour. | | Required: | | 1. | According to the standards, what direct labor cost should have been incurred to prepare 7,200 meals? How much does this differ from the actual direct labor cost? 2. | Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) | | | | | | | __________________________________________________________________ | $ |
