Question 1:

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December:

Cicchetti Corporation Comparison of Actual Results to Planning Budget For the Month Ended December 31
	Actual Results		Planning Budget		Variances
Customers served		38,000		37,000
Revenue (3.50q)	$	133,800	$	129,500	$	4,300	F
Expenses:
Wages and salaries ($23,700 + $1.27q)		71,960		70,690		1,270	U
Supplies ($0.67q)		22,290		24,790		2,500	F
Insurance ($5,600)		5,600		5,600		0
Miscellaneous expense ($4,600 + $.36q)		15,420		17,920		2,500	F
Total expense		115,270		119,000		3,730	F
Net operating income	$	18,530	$	10,500	$	8,030	F

Required:

1.

Prepare a report showing the companys revenue and spending variances for December. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

CICCHETTI CORPORATION

Revenue and Spending Variances

For the Month Ended December 31

	Actual Results	Revenue and Spending Variances	Revenue and Spending Variances	Flexible Budget
Customers served	38,000			38,000
Revenue	$133,800
Expenses:
Wages and salaries	71,960
Supplies	22,290
Insurance	5,600
Miscellaneous expense	15,420
Total expense	115,270			0
Net operating income	18,530			$0

Question 2:

Coderre Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 7,300 units, but its actual level of activity was 7,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for July:

Data used in budgeting:

	Fixed element per month	Variable element per unit
Revenue		$34.80
Direct labor	$0	$6.80
Direct materials	0	13.30
Manufacturing overhead	30,000	2.30
Selling and administrative expenses	26,100	0.80
Total expenses	$56,100	$23.20

Actual results for July:

Revenue	$253,600
Direct labor	$48,970
Direct materials	$98,250
Manufacturing overhead	$46,500
Selling and administrative expenses	$30,530

The revenue variance for July would be closest to:

$440 U

$440 F

$1,300 F

$1,300 U

**** I chose $1,300 F, but I wasn't if it would be F or U.

Question 3:

Hejl Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $510 per month plus $100 per job plus $31 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 21 jobs and 131 meals, but the actual activity was 15 jobs and 138 meals. The actual cost for catering supplies in March was $6,050. The spending variance for catering supplies in March would be closest to:

$621 U

$238 U

$621 F

$238 F

***I chose $238 U, but wasn't sure if it was F or U.

Question 4:

Epley Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate
Direct materials	6.0 pounds	$5.5 per pound
Direct labor	0.8 hours	$24.00 per hour
Variable overhead	0.8 hours	$11.00 per hour

In July the company produced 3,350 units using 13,400 pounds of the direct material and 2,800 direct labor-hours. During the month, the company purchased 14,160 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $66,796 and the actual variable overhead cost was $29,508.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for July is:

$404 F

$404 U

$2,476 U

$2,476 F

*** I chose $404 F, but wasn't sure if it was F or U.

Question 5:

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product.

	Standard Quantity	Standard Price or Rate	Standard Cost
Direct materials	4 pounds	$3.70 per pound	$14.80
Direct labor	2.00 hours	$5.00 per hour	$10.00

During May, Jackson purchased 116,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $366,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 100,000 pounds of direct material and 38,000 direct labor-hours. The price variance for the direct material acquired by Jackson Industries during May is:

$42,400 Favorable

$45,800 Unfavorable

$48,800 Favorable

$42,400 Unfavorable

*** I chose $45,800 Unfavorable, but just wanted to make sure I was right!

Question 6:

Epley Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate
Direct materials	2.0 pounds	$7.00 per pound
Direct labor	1.2 hours	$12.00 per hour
Variable overhead	1.2 hours	$2.00 per hour

In July the company produced 4,900 units using 10,300 pounds of the direct material and 2,280 direct labor-hours. During the month, the company purchased 10,870 pounds of the direct material at a cost of $76,750. The actual direct labor cost was $38,240 and the actual variable overhead cost was $11,941.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for July is:

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$520 U

$660 F

$3,500 U

$520 F

*** I chose $3,500 U, but wanted to make sure I was right!