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Ohio State University's former head football coach Urban Meyer has a long list of ethical transgressions (i.e. suspending star quarterback J.T. Barrett for all
Ohio State University's former head football coach Urban Meyer has a long list of ethical transgressions (i.e. suspending star quarterback J.T. Barrett for all of one game, after Barrett got a DUI and pulled out the "Do you know who I am?" card typical Buckeye behavior). Meyer is no longer at Ohio State, and just recently got fired by the Jacksonville Jaguars. To keep himself busy, he (fictional from here on) secretly works for Ohio State by paying recruits share revenues raised from selling bootleg memorabilia (although college athletes are now eligible to get paid, recruits cannot be bribed) In order to keep this secret ring profitable, Urban Meyer needs to be meticulous in his budgeting and accounting. He creates his quarterly secret budget for shady activities based on the following breakdown and uses two cost drivers, number of memorabilia items and number of recruits: Fixed Element Variable Element Variable Element per quarter $0 $0 $0 $25,000 per item $250 $0 $80 $10 per recruit $0 $2,000 $20 $25 Revenue. "Recruiting" Expenses.. "Selling" Expenses.... "Maintenance" Expenses.... In 4Q 2021, Urban Meyer budgeted for 2,000 memorabilia items and 150 recruits. Urban's income statement showing the actual results for the quarter appears below: Actual # of memorabilia items...2,250 Actual # of recruits.. $583,200 $337,230 $205,010 $63,660 -$22,700 .155 Revenue... "Recruiting" Expenses.. "Selling" Expenses.... "Maintenance" Expenses... Net Operating Income.... a. What is the activity spending variance for "selling" expenses? (3 points) b. What is the revenue variance? (3 points) Urban Meyer is concerned that his shady activities did not bring profitable results. He wanted to investigate his spending variances in greater detail. The six variances as they relate to manufacturing of bootleg memorabilia are listed as follows: $35,650 unfavorable $15,500 favorable $47,200 unfavorable $7,600 favorable $10,500 unfavorable $8,825 favorable Materials Quantity Variance Materials Price Variance Labor Efficiency Variance Labor Rate Variance Variable Overhead Efficiency Variance Variable Overhead Rate Variance c. Urban Meyer lacks the knowledge to deal with these variances. He asks you, a much more intelligent soul, for help. Which two variances would you recommend that Urban Meyer investigate first in greater detail? (2 points) d. Labor rate variance is slightly favorable but labor efficiency variance is very unfavorable. What is one reason that could have contributed to both of these results? (1 point) e. Materials quantity variance is favorable but material quantity variance is more unfavorable. What is one reason that could have contributed to both of these results? (1 point)
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