Memo to Management a) Summarize your quantitative analysis based on your findings (include answers to all questions in Sections I, II, and III). b) Report the parts of the budgeting process that are in need of improvement. Provide suggestions to improve those parts. c) Report overall improvement recommendations to management. Consider the ethical implications when communicating sensitive information.

Milestone One, Part I Product Costs Materials - Cedar Materials - Plastic Factory Worker Labor Materials - Indirect Factory Depreciation Factory Utilities Factory Maintenance and Repairs Period Costs Shipping ($2.25/each) Sales Commissions ($2.00/unit sold) Office Rent Advertising Liability insurance Office Depreciation Office Salaries Product Costs Vs. Period Costs Product costs are the costs associated with the process of manufacturing a product. These inven Period costs are all the other costs not associated with the production process. These costs are n ntoriable costs typically include direct materials, direct labor and indirect costs or manufacturing overhead noninventoriable and are considered to be actual expenses for the period in which they occur. examples of ing overhead such as, factory depreciation and utilities. examples of period costs are administrative salaries, advertising, marketing and distribution Milestone One, Part II Use Table I on the MDE Manufacturing Budget to complete your calculations. Totals Budget $ 21 Sales Price per Unit Variable Costs Materials - Cedar Materials - Plastic Factory Worker Labor Materials - Indirect Shipping ($2.25/ea) Sales Commissions ($2/unit sold) Totals Actual 21 225,000 37,500 300,000 3,000 112,500 100,000 248,160 37,741 332,760 2,585 105,750 94,000 Variable Cost per Unit 16 17 Contribution Margin 5 4 78,000 12,000 5,000 12,000 20,000 5,000 1,000 48,000 181,000 78,000 12,000 4,500 12,000 20,000 5,000 1,000 48,000 180,500 Contribution Margin Percentage Fixed Costs Factory Depreciation Factory Utilities Factory Maintenance and Repairs Office Rent Advertising Liability Insurance Office Depreciation Office Salaries Total Fixed Costs Using Budgeted Amounts Breakeven Point - Using Actual Amounts + 10,000 profit Using actual amounts + 10,000 profit Total Fixed Cost Contribution Margin 181,000 5.00 Breakeven Po Total Fixed Cost Contribution Margin 190,500 4.00 Units at Curre 190,500 47,000 New Contribu Current Varia New Sales Pr Fixed Cost+10,000 47,000 Units Sold Point - 36,200 urrent Sales Price ribution Margin riable Costs Price 47,625 4 17 21 Milestone Two, Part I Use Tables I through IV on the MDE Manufacturing Budget to complete your calculations. Refer to Exhibit 7-2 on page 253 of the text From Flexible Budget Calculations Sheet Budget Model Units Sold Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Costs Fixed Manuf. Overhead Total Costs Gross Margin Actual 47,000 Flexible Budget Variance Favorable/ Unfavorable Flexible Budget 47,000 $991,700 $4,700 Favorable $987,000 37,741 248160 332760 2,585 621,246 94,500 715,746 $275,954 -2,491 Unfavorable -36,660 Unfavorable -50,760 Unfavorable 235 Favorable -89,676 Unfavorable 500 Favorable -89,176 Unfavorable 84,476 Unfavorable 35250 211500 282000 2820 531570 95000 626570 360430 Sales Volume Variance ($63,000) Favorable/ Unfavorable Unfavorable 2,250 Favorable 13,500 Favorable 18,000 Favorable 180 Favorable 33,930 Favorable 0 33,930 Favorable -29,070 Unfavorable Static Budget 50,000 $1,050,000 37,500 225000 300000 3,000 565,500 95000 660,500 $389,500 Milestone Two, Part II Use the variance supporting calculation tab to complete your calculations. Direct Materials - Cedar Direct Materials - Plastic Direct Labor Variable Manufacturing Overhead Price Variance -22560 1034 Efficiency Variance -14100 -3525 Spending Variance -705 Efficiency Variance 940 Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Manufacturing Costs Fixed Manufacturing Overhead Total Manufacturing Costs Gross Margin Budgeted Unit Amounts $ 21.00 4.50 Actual Volume 47,000 47,000 47,000 47,000 47,000 Flexible Budget Amount $987,000 35,250 211,500 282,000 2,820 531,570 95,000 626,570 $360,430 Use Tables III and IV on the MDE Manufacturing Budget to complete your calculations. Development of Price and Efficiency Variances - Calculations DM-Plastic DM-Cedar Actual Feet per Unit Actual Units 1.1 47,000 3.2 47,000 Direct Manuf. Labor Actual Labor Actual Labor Actual Labor Cost per Hour Costs Hours $ 11.80 332,760 28,200 Actual Costs Incurred (Actual Input Qty. Actual Price) Actual Feet per Unit Actual Units Direct Material Plastic 47,000 $ Direct Material Cedar 47,000 $ Actual Units Direct Manufacturing Labor 3.2 $ 248,160 $ Actual Hours per Unit 47,000 $ $ Actual Costs Variable manufacturing overhead $ $ 2,585.0 2,585.00 Actual Units 0.73 Actual Feet per Budgeted Cost Unit per Foot 47,000 $ 1,034 Price Variance 1.65 47,000 $ (22,560) Price Variance Actual Cost per Hour 0.60 $ 332,760 $ Actual Costs Actual Input Qty. Budgeted Price Actual Price per Foot 1.1 $ 37,741 $ Actual Feet Used 51,700 150,400 Actual Units 11.80 1.1 $ 38,775 $ 3.2 $ 225,600 $ Actual Hours per Unit 47,000 $ $ 5,640 Price Variance 0.75 (3,525) Efficiency Va 1.50 (14,100) Efficiency Va Budgeted Cost per Hour 0.60 $ 338,400 $ 12.00 (56,400) Efficiency Va Actual Input Qty. Budgeted Price Actual Units Actual Feet per Budgeted Cost Unit per Foot 47,000 $ 0.2 $ 1,880 0.20 $ (705) Spending Variance $ 940 Efficiency Va Actual Cost per Actual Cost Foot 37,741 $ 0.73 248,160 $ 1.65 Actual Labor Actual Units Hours per Unit 47,000 0.60 Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Budgeted Feet per Unit Actual Units 47,000 Budgeted Cost per Foot 0.75 $ 1 $ 35,250 1.50 $ 3.0 $ 211,500 y Variance 47,000 y Variance Actual Units Budgeted Hours Budgeted Cost per per Unit Hour 47,000 0.5 $ 282,000 $ 12.00 y Variance Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Actual Units Budgeted Feet per Unit 47,000 $ Budgeted Cost per Foot 0.3 $ 2,820 0.20 y Variance