Help me to solve this Budget

case

Background:

Pristine Cleaning Services (PCS) is a local business in the Tri-cities area. It provides cleaning services to residential households and commercial establishments. Both households and businesses sign contracts with PCS. As the contractor, PCS dispatches its crew to the locations. The crew performs the cleaning as per the contracts and reports back to the company main desk. The main desk then prepares the invoice and sends them to the clients. Clients have one day to pay the invoice. Sales volume can vary from one quarter to the next.

In terms of expenses, the main expense for PCS relates to labour. They pay crew members competitive wages and benefits. The wage rate is calculated on an hourly basis and is fixed for the entire year.

The next expense item is cleaning supplies. PCS accounts for cleaning supplies relative to the hours worked. For example, they estimate that cleaning supplies are consumed at a rate of 0.2 litres per labour hour. This is a good measure because the longer it takes for a site to be cleaned, the more the consumption of cleaning supplies. Cleaning supplies are procured from a prominent vendor and the cost is fixed for the entire year.

Budget for the year 2021:

The budget for the year 2021 was prepared in December 2020 and had the following components:

Revenue:

The revenue is calculated as number of hours that the crew works on a site, multiplied by the contracted rate with the client. The hours worked in the residential and commercial segments are shown separately, and there is a total for the combined hours worked. The revenue for each segment is arrived at by multiplying the hours for the segment by the rate. The budget is prepared for four quarters, one to four.

For 2021, the budgeted sales hours were:

Quarter 1

Budgeted commercial sales in hours - 2500

Budgeted residential sales in hours - 2600

quarter 2 -

Budgeted commercial sales in hours - 2600

Budgeted residential sales in hours - 2200

quarter 3 -

Budgeted commercial sales in hours - 2200

Budgeted residential sales in hours - 2000

quarter 4-

Budgeted commercial sales in hours - 2000

Budgeted residential sales in hours - 2600

For 2021, the budgeted sales hours were:

Quarter 1 , 2 , 3 , 4

Selling price per hour (commercial). 46

Selling price per hour (residential). 52

Direct Labour expense:

PCS will pay its employees an hourly rate of $ 23 for the entire year.

Cleaning supply usage:

The budgeted usage is 0.28 litre / labour hour for the commercial segment and 0.2 litre/ labour hour for the residential segment. This is constant for the entire year.

Cleaning supply expense:

Budgeted expense is $ 6.00 per litre for the entire year.

Fixed overhead:

To support the cleaning operations, there are four items of expenditure. These are designated as overheads and their budgeted expenses are as follows:

Receptionist:

Budgeted expense is $ 6 000 per quarter and is the same for all four quarters.

overheads and their budgeted expenses are as follows:

Receptionist:

Budgeted expense is $ 6 000 per quarter and is the same for all four quarters.

Depreciation:

This relates to the depreciation of vehicles used to transport employees to client locations. Budgeted expense is $ 8 000 per quarter and is the same for all four quarters.

Gas:

Budgeted expenditure on gas is $ 7,500 and is the same for all four quarters.

Maintenance:

Budgeted expenditure on Office Supplies is $ 1 200 per quarter and is the same for all four quarters.

Actual results for the year 2021.

It is now January 7, 2022 and Sparkling Clean Services (PCS) is comparing the actual expenses against their budget. Here is what they found.

Revenue: For 2021, the actual sales hours were:

Quarter 1

Actual sales - commercial 2400

Actual sales - residential. 2500

quarter 2

Actual sales - commercial 2600

Actual sales - residential. 2300

Quarter 3

Actual sales - commercial 2300

Actual sales - residential. 1800

Quarter 4

Actual sales - commercial 2100

Actual sales - residential. 2400

For 2021, the actual hourly revenue was:

Quarter

Actual selling price - commercial

Actual selling price - residential

1

$45

$53

2

$45

$53

$45

$53

4

$45

$53

Direct Labour expense:

PCS paid its employees an hourly rate of $ 24 for the entire year.

Cleaning supply usage:

The actual usage was 0.35 litre / labor hour for the commercial segment and 0.3 litre/ labour hour for

the residential segment. This was constant for the entire year.

Cleaning supply expense:

Actual expense was $6.30 per liter for the entire year.

Fixed overhead:

To support the cleaning operations, there are four items of expenditure. These are designated as overheads and their budgeted expenses are as follows:

overheads and their budgeted expenses are as follows:

Receptionist:

Actual expense was $ 6 200 per quarter and is the same for all four quarters.

Depreciation:

This relates to the depreciation of vehicles used to transport employees to client locations. Actual expense was $ 8 200 per quarter and was the same for all four quarters.

Gas:

Actual expenditure on gas was $ 7 100 and was the same for all four quarters.

Maintenance:

Actual expenditure on Office Supplies was $ 1 000 per quarter and was the same for all four quarters.

Required:

Part A:

. Complete the following steps

in sequence:

Step #

Spreadsheet title

1

Input Database

2

Static Budget

Actual Budget

4

Flexible Budget

Var Analysis - Static and

Flex

Material variances

Labour variances