Posted: July 19th, 2016

Subdivide each variance into a sales-activity variance portion and a flexible budget variance portion?

Flexible budget preparation:
Tik-a-Lock, Inc., manufactures travel locks. The budgeted selling price is $18 per lock, the variable cost is $12 per lock, and budgeted fixed costs are $12,000.

1. Prepare a flexible budget for output levels of 6,000 locks and 9,000 locks for the month ended April 30, 2011.

You have been asked to prepare an analysis of the overhead costs in the order processing department of a mail-order company like Harriet Carter Corporation. As an initial step, you prepare a summary of some events that bear on overhead for the most recent period. Variable overhead is applied based on hours of processing-clerk labor. The standard variable-overhead rate per order was $.06. The rate of 10 orders per hour is regarded as standard productivity per clerk. The total overhead incurred was $203,600, of which $135,900 was fixed. The fixed-overhead spending variance was $400 unfavorable. The variable-overhead flexible-budget variance was $5,600 unfavorable. The variable-overhead spending variance was $3,000 favorable. Find the following:
1. Variable-overhead efficiency variance
2. Actual hours of input
3. Standard hours of input allowed for output achieved
4. Budgeted-fixed overhead

Beta Gamma Sigma, the business honor society, recently held a dinner dance. The original (static) budget and actual results were as follows:
Static Budget ACtual Variance
Attendees 75 90
Revenue $2625 $3255 $630F
Chicken dinners at $19 1425 1767 342U
Beverages, $6 per person 450 466 16U
Club rental, $75 plus 8% tax 81 81 0
Music, 3 hours at $250 per hour 750 875 125U
Profit (81) 66 $147F
1. Subdivide each variance into a sales-activity variance portion and a flexible budget variance portion.
2. Provide possible explanations for the variances.

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