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.

1. Prepare a flexible budget for the activity of moving materials, but you will use the number of moves as the activity driver. Use 70,000 moves and 90,000 moves.

	COST FORMULA		MOVES PER HOUR = Fixed + (Variable * # of Moves)
	Fixed	Variable	70,000	90,000
Salaries
Leases
Crates
Fuel
Total

2. What if the actual costs incurred were the amounts below for 70,000 moves. Prepare an activity-based performance report to present a comparison of actual to budget with a budget variance determine. You must also designate U or F if there is a variance and variances should not be shown in absolute terms.

Activity Actual Cost

Salaries $1,290,000

Leases 144,000

Crates 117,000

Fuel 24,000

	Actual Costs	Budgeted Costs	Budget Variance
Salaries
Leases
Crates
Fuel
Total

3. 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.