Question
Moving Inc. wants to develop an activity flexible budget for the activity of moving materials. Moving Inc. uses 8 forklifts to move materials from receiving
Moving Inc. wants to develop an activity flexible budget for the activity of moving materials. Moving Inc. uses 8 forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $19,000 per year per forklift. Moving, Inc. employs 25 forklift operators who receive an average salary of $50,000 per year, including benefits. Each move requires the use of a crate. The crates are disposed of after a move from receiving to the storeroom to production are complete. Each crate costs $1.80. Fuel for a forklift costs $3.60 per gallon. A gallon of gas is used every 10 moves. Forklifts can make 3 moves per hours and are available for 280 days per year. Each operator works 40 hours per week.
COST FORMULA | MOVES PER HOUR | |||
Fixed | Variable | 70,000 | 90,000 | |
Salaries | $1,250,000 | - | $1,250,000 | $1,250,000 |
Leases | $152,000 | - | 152,000 | $152,000 |
Crates | - | $1.80 | 126,000 | 162,000 |
Fuel | - | $0.36 | 25,200 | 32,400 |
Total | $1,402,000 | $2.16 | $1,553,200 | $1,596,400 |
Actual Costs | Budgeted Costs | Budget Variance | ||
Salaries | $1,290,000 | $1,250,000 | $40,000 | U |
Leases | 144,000 | 152,000 | 8,000 | F |
Crates | 117,000 | 126,000 | 9,000 | F |
Fuel | 24,000 | 25,200 | 1,200 | F |
Total | $1,575,000 | $1,553,200 | $21,800 | U |
1. Explain what type of value that the moving activity provides the company. Provide a recommendation on what the company should attempt to do with this activity.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started