Question
Hi, I need help with C and F if you could explain it. https://docs.google.com/document/d/1Vhfxwoz8GQBCqrmbAiE-z8qkGXAzbSy4cIBG5Nvj27A/edit?usp=sharing Vroom-Vroom manufactures ride-on cars for toddlers and young children. They have
Hi, I need help with C and F if you could explain it.
https://docs.google.com/document/d/1Vhfxwoz8GQBCqrmbAiE-z8qkGXAzbSy4cIBG5Nvj27A/edit?usp=sharing
Vroom-Vroom manufactures ride-on cars for toddlers and young children. They have a fiscal year of January through December. When they were preparing their budget, they couldn't decide if a static or flexible budget would be best for their company - so they did both. It is now March, and their accounting department is catching up on analyzing variances for both January and February. Vroom-Vroom would like to use this opportunity to determine whether they would be better off with a static or flexible budget going forward. They want to choose which budget and related variance analysis provides them the best information for decision-making.
Here is the data that Vroom-Vroom used for their budgets:
Monthly budget data
Selling price per unit-$79 per each
Raw materials cost-$32 per each
Packaging cost-$16 per each
Electricity-$5 per each
Waste and other cost-$7 per each
Salary and wages cost-$580,000 per month
Fringe benefits-50% of salaries
Rent cost-$950,000 per month
Insurance cost-$60,000 per month
Depreciation cost-$370,000 per month
Vroom-Vroom estimated sales/production will be between 100,000 and 300,000 cars per month. Their static budget is based on 200,000 cars sold per month. Assume that all units produced in a month are also sold in that month. Vroom-Vroom's unit of production/sale is a car (unit/each).
Here are the Actual Results in January and February:
Actual data:
Production (units)
JAN-245,000
FEB- 187,000
Revenue
JAN- $19,345,000
FEB-$14,888,000
Raw materials
JAN-$7,545,000
FEB- $5,796,000
Packaging materials
JAN- $3,928,000
FEB- $2,997,000
Electricity
JAN- $1,175,000
FEB- $842,000
Waste and other costs
JAN- $1,837,000
FEB- $1,442,000
Wages
JAN- $575,000
FEB- $585,000
Fringe benefits
JAN-$287,000
FEB- $292,500
Rent
JAN-$950,000
FEB- $950,000
Insurance
JAN- $60,000
FEB- $65,000
Depreciation
JAN- $370,000
FEB- $340,000
Question 2:Prepare flexible budget in Excel for Vroom-Vroom.
a)Show the flexible budget for January in Contribution Margin Income Statement format.
b)Compare January's flexible budget to January's actual results. Specify which line items are favorable or unfavorable and how much.
c)For Raw Material Costs and Packaging Costs, break out the Price and Volume Variances for January. Provide potential explanations. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.
d)Show the flexible budget for February in Contribution Margin Income Statement format.
e)Compare February's flexible budget to February's actual results. Specify which line items are favorable or unfavorable and how much.
f)For Raw Material Costs and Packaging Costs, break out the Price and Volume Variances for February. Provide potential explanations for each one. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.
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